New Economics Papers
on Banking
Issue of 2008‒08‒14
three papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Fast and accurate simulation of differently seasoned loan defaults in a Merton-style framework in discrete time By Varsanyi, Zoltan
  2. Mensuração do Risco Sistêmico no Setor Bancário com Variáveis Contábeis e Econômicas By Lucio Rodrigues Capelletto; Eliseu Martins; Luiz João Corrar
  3. Monetary and financial integration in the EMU: Push or pull? By Mark M. Spiegel

  1. By: Varsanyi, Zoltan
    Abstract: In this paper I present a method for the simulation of the default of such loans that have two important properties: they are seasoned – maybe even being at different points of the seasoning curve – and they evolve in an asset-value based framework. This latter model allows us to introduce correlation between the loan defaults. Although these two features are widely considered in modelling, linking them into one single (simulation) framework might not be that common. However, the most important merit of this paper is showing a fast and accurate simulation algorithm for the asset values.
    Keywords: credit risk; simulation
    JEL: C15
    Date: 2008–08
  2. By: Lucio Rodrigues Capelletto; Eliseu Martins; Luiz João Corrar
    Abstract: The systemic risk in the financial system has been a constant concern for the international institutions and supervisory authorities. The financial crises occurred in several countries have caused significant economic damages and high social costs. The objective of this study is to measure the systemic risk of the banking system, utilizing accounting and economic variables together. Through the volatilities of economic variables, like interest rate and foreign exchange rate, and accounting variables, representatives of credit quality and liquidity, it was possible to build indicators comprising risk factors. These indicators were submitted to logistic regression analysis, in order to test the statistic significance of them, and to verify the existence of a model to evaluate the probability of any banking system be classified as susceptible, or not, to financial crises. The results exposed the existence of accounting and risk indicators capable to discriminate banking systems according to the risk level. The accounting and economic variables most associated to financial crises are related to credit quality, earnings, and interest rate level. All of indicators composed by these variables showed to be relevant in the classification process. Confirming that, the equations resulted in correct classification above 90%.
    Date: 2008–07
  3. By: Mark M. Spiegel
    Abstract: A number of studies have recently noted that monetary integration in the European Monetary Union (EMU) has been accompanied by increased financial integration. This paper examines the channels through which monetary union increased financial integration, using international panel data on bilateral international commercial bank claims from 1998-2006. I decompose the relative increase in bilateral commercial bank claims among union members following monetary integration into three possible channels: A "borrower effect," as a country's EMU membership may leave its borrowers more creditworthy in the eyes of foreign lenders; a "creditor effect," as membership in a monetary union may increase the attractiveness of a nation's commercial banks as intermediaries, perhaps through increased scale economies enjoyed by commercial banks themselves or through an improved regulatory environment after the advent of monetary union; and a "pairwise effect," as joint membership in a monetary union increases the quality of intermediation between borrowers and creditors when both are in the same union. This pairwise effect could be attributed to mitigated currency risk stemming from monetary integration, but may also indicate that monetary union integration increases borrowing capacity. I decompose the data into a series of difference-in-differences specifications to isolate these three channels and find that the pairwise effect is the primary source of increased financial integration. This result is robust to a number of sensitivity exercises used to address concerns frequently associated with difference-in-differences specifications, such as serial correlation and issues associated with the timing of the intervention.
    Keywords: Banks and banking - Europe ; Euro ; European Monetary System (Organization)
    Date: 2008

This issue is ©2008 by Roberto J. Santillán–Salgado. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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