Search results for "Interest"
showing 10 items of 624 documents
Risk Management for Sovereign Financing within a Debt Sustainability Framework
2018
The mix of instruments used to finance a sovereign is a key determinant of debt sustainability through its effect on funding costs and risks. We extend standard debt sustainability analysis to incorporate debt-financing decisions in the presence of macroeconomic, financial, and fiscal risks. We optimize the maturity of debt instruments to trade off borrowing costs with refinancing risk. Risk is quantified with a coherent measure of tail risk of financing needs, conditional Flow-at-Risk. A constraint on the pace of reduction of debt stocks is also imposed, and we model the effect of debt stocks on the yield curve through endogenous risk and term premia. On a simulated economy, we show that t…
Financial incentive to prepay in fixed-rate mortgages
2004
The borrower's financial incentive to prepay is a crucial determinant in estimating prepayment in mortgage pools and, consequently, in valuing mortgage-backed securities. In mortgage prepayment literature, this incentive to prepay has been proxied by both the ratio of the loan rate to the refinancing rate and by the arithmetic spread between the two rates; however, the former is considered to be a better proxy of the refinancing incentive than the latter by a section of the literature. In this paper, the authors check the accuracy of that statement and subsequently estimate two prepayment functions using, alternatively, the two proxies. The results indicate that the use of the ratio does no…
Financing successful small business projects
2014
Purpose – The current credit rationing strongly influences the viability of SMEs innovation projects. In this context, the practice of screening borrowers by project success probability has become a paramount consideration for both lenders and firms. The aim of this paper is to test the screening role of loan contracts that consider collateral-interest margins simultaneously. Design/methodology/approach – This paper presents an empirical analysis that uses a unique data set composed of 323 bank loans granted by 28 banks to SMEs backed by a Spanish Mutual Guarantee Institution. Findings – The results show that appropriate combinations of collateral and interest rates can distinguish between…
GOVERNANCE-BASED ACQUISITIONS AND RISK TAKING IN BANKING
2008
We examine the market for corporate control in banking when strategic acquisitions are driven by the different governance structures of commercial and savings banks. In contrast to profit-maximizing entities, we show that savings institutions can have acquisition incentives from their peculiar governance and ownership structure. Governance-based acquisition incentives, which interact with the specifics of the loan market in affecting bank risk taking, can arise when acquisitions take place sequentially or simultaneously, and also when financial intermediaries affect risk taking directly through the target return of investments or indirectly through the loan interest rate.
The Impact of Financial Arrangements and Institutional Form on Housing Prices
2009
Published version of an article from the journal: The Journal of Real Estate Finance and Economics. Also available on SpringerLink: http://dx.doi.org/10.1007/s11146-009-9213-z Dwellings in housing cooperatives constitute 15% of the Norwegian housing property market. The price paid for such dwellings consists of two elements: An equity price and a share of the mutual debt held by the cooperative. The interest rate paid on the housing cooperative’s mutual debt is in Norway lower than the interest rate paid on private loans. This gives rise to an interest discount effect . We find convincing empirical support for the interest discount effect, which contributes to a higher equity price for dwel…
Financing of Productive Investments: A Model with Coordinated Scenarios
2015
This research raises a company that knows the cash requirements to purchase capital equipments in order to satisfy the demand for the products of each of the proposed scenarios. The company is negotiating with credit institutions a series of loans at different interest rates. Also, the company can make capital increases. A model focused on the financial needs using scenarios allows us to combine funding sources to cover the costs of the acquisition of production equipment to meet the demand for each scenario. This combination remunerates own financing, settles interest and repays the borrowed capital. The results indicate that the model is robust and minimizes the financial cost of a possib…
CREDIT RISK MANAGEMENT IN COMMERCIAL BANKS
2016
The article proposes a model of credit risk assessment on the basis of factor analysis of retail clients / borrowers in order to ensure predictive control of the level of risk posed by potential clients in commercial banks engaged in consumer lending. The aim of the study is to determine the level of risk represented by different groups (classes) of retail clients (borrowers) in order to reduce and prevent credit risk in the future as well as to improve the management of banking risks. The main results of the study are the creation of a model of borrowers internal credit ratings and the development of the methods of improving credit risk management in commercial banks.
The Role of Net Interest Margin in Improving Banks’ Asset Structure and Assessing the Stability and Efficiency of their Operations
2014
Abstract Against the background of the growing diversity of financial instruments, technological progress and increasing interconnectedness of financial institutions, ensuring the stability of the banking sector has become an important task for economic policy in every country. This paper shows that net interest margin is the most appropriate criterion for evaluating the effectiveness and stability of banks’ operations. It is superior to the return on assets in illustrating how successfully a bank manages its interest bearing assets. The author analyzes banking sectors in the Baltic countries, the Euro Area as well as the United States and their management strategies, as well as indicators …
Nonrenewable Energy Prices and Stock Prices of EU Financial Companies: A Short Versus Long-Term Analysis
2021
This paper investigates the relationship between financial companies’ stock prices and nonrenewable energy sources prices (crude oil and coal price) using a sample of major financial companies headquartered in the EU. The link between stock prices and nonrenewable energy sources prices risk is modeled using a set of macroeconomic variables, such as Brent crude oil price, coal price, local stock market indices, the EUR/USD exchange rate, long-term interest rates and a global volatility measure (VIX). We apply panel data as the base econometric model and an ARDL extension that sheds light on the long versus short-run exposure of EU financial companies to nonrenewable energy prices volatility.…
Political Interference in Financial Reporting in the Financial Industry: Evidence from Spain
2018
This paper provides a theoretical background, based on legal and political fields, which we adapt to explain political interference in accounting in the “public interest”, at a critical moment —the last financial crisis. This framework goes beyond the positive accounting theory, and in particular the political cost hypothesis, to explain politicians’ influence on financial reporting. We examine the behavior of the newly elected Spanish government, which issued accounting impairment rules for banks in spite of IFRS being in place. The paper considers a highly politically connected financial entity —Bankia— as a case under study, where the political interference might have impacted the accoun…