Search results for "financial risk"
showing 10 items of 44 documents
Systemic Risk in a Structural Model of Bank Default Linkages
2018
Abstract We study a structural model of individual bank defaults across the banking sector; banks are interconnected through their exposure to a common risk factor. The paper introduces a systemic risk measure based on the default frequency in the banking sector; this measure depends non-linearly on the factor's loadings, in contrast to previous systemic risk measures that depend linearly on loadings. We estimate loadings in the U.S. banking system over the course of the last 36 years; we find that they have considerably increased over time and identify four major regimes. Our measure shows that systemic risk became critical in the last of our four regimes, covering the most recent time per…
The Value Relevance of Risk Disclosure: An Analysis of the Banking Sector
2020
The aim of this study is to test whether financial risk disclosures required by IFRS 7 and Pillar 3 are value relevant for investors to support them in their investment decisions. The sample in the...
Investment Decision Making and Risk
2013
Abstract The aim of the paper is to present how investment decisions are made and what investment risk is, what role it has in the investment decision. The decision itself is a subjective act, but it is based on both subjective and objective factors. Risk is an important component of every investment, thus it is necessary to analyse it as both, the objective component of the investment, and as the subjective factor of the investment decision making.
Forecasting Latin America’s Country Risk Scores by Means of a Dynamic Diffusion Model
2013
Over the last years, worldwide financial market instability has shaken confidence in global economies. Global financial crisis and changes in sovereign debts ratings have affected the Latin American financial markets and their economies. However, Latin American s relative resilience to the more acute rise in risk seen in other regions like Europe during last years is offering investors new options for improving risk-return trade-offs. Therefore, forecasting the future of economic situation involves high levels of uncertainty. The Country Risk Score (CRS) represents a broadly used indicator to measure the current situation of a country regarding measures of economic, political, and financial…
Linear and nonlinear interest rate exposure in Spain
2010
PurposeThis paper aims to carry out a comprehensive analysis of the influence of interest rate risk on Spanish firms at the industry level.Design/methodology/approachThe methodology employed has its origin in the two‐index linear regression model proposed by Stone. This traditional interest rate exposure model has been extended in this paper to allow for a nonlinear exposure component as well as the presence of asymmetric behaviour in the exposure pattern.FindingsInterest rate exposure is not homogeneous for all the Spanish industries. In line with other markets, highly leveraged industries (construction and real estate), regulated industries (electrical and utilities), and banking industry…
Virtual and Augmented Reality in Finance: State Visibility of Events and Risk"
2021
This chapter reflected on the potential of Virtual Reality and Augmented Reality (VR / AR) technologies in supporting the dynamics of global financial systems and in addressing the grand challenges posed by unexpected events and crisis. The chapter briefly overviewed traditional VR/AR uses and described three early attempts to use 3D/ VR / AR technologies in Finance. In light of the recent financial crisis, there is a potential added valued in harnessing the use of VR/AR technologies to convey a greater visibility of the financial state (including visibility of financial risk). Various dimensions of the problem are considered. The chapter suggested a blend of service oriented computing SOC …
Credit risk and efficiency in the European banking system: A three-stage analysis
2002
Increased competition and the attempts of European banks to increase their presence in other markets may have affected the efficiency and credit risk in the banking system. The first aspect is the incentive in reducing costs in order to gain in competitiveness. The second is associated with their lack of knowledge of such markets and/ or acceptance of a higher risk in order to increase their market share. Despite the importance of these aspects, banking literature has usually analysed the effects of competition on the efficiency of banking systems without considering these aspects. The few studies that attempt to obtain risk adjusted efficiency measures do not consider that part of the risk…
Is There a Credit Risk Anomaly in FX Markets?
2015
This paper explores whether a link between sovereign credit ratings and currency returns exists. Perhaps contrary to expectations, it finds that currencies of countries with higher credit risk tend to generate lower returns than those with a lower credit risk. The credit risk spread cannot be explained by standard risk factors.
Probabilistic European Country Risk Score Forecasting Using a Diffusion Model
2013
Over the last few years, global crisis has shaken confidence in most European economies. As a consequence, a lack of confidence has spread amongst European countries leading to Europe’s financial instability. Therefore, forecasting the next future of economic situation involves high levels of uncertainty. In this respect, it would be interesting to use tools which allow to predict the trends and evolution of each country’s confidence rating. The Country Risk Score (CRS) represents a good indicator to measure the current situation of a country regarding measures of economic, political and financial Risk in order to determine country Risk ratings. CRS is underscored by Euromoney Agency and is…
Aggregation of Risk Level Assessments Based on Fuzzy Equivalence Relation
2017
The paper deals with the problem of aggregation of risk level assessments. We describe the technique of a risk level evaluation taking into account values of the risk level obtained for objects which are in some sense equivalent. For this purpose we propose to use the construction of a general aggregation operator based on the corresponding fuzzy equivalence relation. Numerical example of the investment risk level aggregation using an equivalence relation obtained on the basis of different macroeconomic factors for countries of one region is considered.