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on Financial Markets |
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Issue of 2012‒04‒03
five papers chosen by |
| By: | Márcio Laurini (IBMEC Business School) |
| Abstract: | The paper discusses the use of statistical methods in the comparison of investment fund performance indicators. The analysis is based on the robust statistics proposed by Ledoit and Wolf (2008), for the pairwise comparison of funds and two generalizations for sets of multiple investment funds. The multiple investment fund tests use the Wald and Distance Metric statistics, based on estimation by Generalized Method of Moments using HAC matrices. In order to correct power limitations in the GMM estimation in the case of a large number of moment conditions, the test distributions are obtained through block-bootstrap procedures. We applied the proposed procedures to daily return data for the largest 97 actively managed equity funds in the Brazilian market, covering the period from July 2006 to July 2008. The results indicate that there are no significant differences in the performances of the 97 funds in the sample, both in pairwise and joint comparisons, thus providing what is believed to be the first Brazilian market evidence for the so-called herding hypothesis. |
| Keywords: | Sharpe Ratio, GMM, Investment Analysis |
| JEL: | G11 G14 |
| Date: | 2012–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:ibr:dpaper:2012-03&r=fmk |
| By: | Duellmann, Klaus; Kick, Thomas |
| Abstract: | This paper introduces a stress test of the corporate credit portfolios of 24 large German banks by a two-stage approach: First, a macro-econometric model is used to forecast the impact of a substantial increase of the user cost of business capital for firms worldwide on three particularly export-oriented industry sectors in Germany. Second, the impact of this economic multi-sector stress on banks' credit portfolios is captured by a state-of-theart CreditMetrics-type portfolio model with sector-dependant unobservable risk factors as drivers of the systematic risk. The German credit register provides us with access to highly granular risk information on loan volumes and banks' internal estimates of default probabilities which is key for an accurate assessment of the impact of the stress scenario. We find that the increase of the capital charge for the unexpected loss needs to be considered together with the increase in banks' expected losses in order to assess the change of banks' capital ratios. We also confirm that highly granular information on the level of borrowerspecific probabilities of default has a significant impact on the outcome of the stress test. -- |
| Keywords: | Asset correlation,portfolio credit risk,macroeconomic stress tests |
| JEL: | G21 G33 C13 C15 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:042012&r=fmk |
| By: | Pausch, Thilo; Welzel, Peter |
| Abstract: | We integrate Basel II (and III) regulations into the industrial organization approach to banking and analyze the interaction between capital adequacy regulation and credit risk transfer with credit default swaps (CDS) including its effect on lending behavior and risk sensitivity of a risk-neutral bank. CDS contracts may be used to hedge a bank's credit risk exposure at a certain (potentially distorted) price. Regulation is found to induce the risk-neutral bank to behave in a more risk-sensitive way: Compared to a situation without regulation the optimal volume of loans decreases more as the riskiness of loansincreases. CDS trading is found to interact with the former effect when regulation accepts CDS as an instrument to mitigate credit risk. Under the substitution approach in Basel II (and III) a risk-neutral bank will over-, fully or under-hedge its total exposure to credit risk conditional on the CDS price being downward biased, unbiased or upward biased. However, the substitution approach weakens the tendency to over-hedge or under-hedge when CDS markets are biased. This promotes the intention of the Basel II (and III) regulations to 'strengthen the soundness and stability of banks'. -- |
| Keywords: | Banking,regulation,credit risk |
| JEL: | G21 G28 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:052012&r=fmk |
| By: | Cerqueiro, Geraldo (Universidade Católica Portuguesa); Ongena, Steven (CentER - Tilburg University and CEPR, Department of Finance); Roszbach, Kasper (Research Department, Central Bank of Sweden) |
| Abstract: | We study a change in the Swedish law that exogenously reduced the value of all outstanding company mortgages, i.e., a type of collateral that is comparable to the floating lien. We explore this natural experiment to identify how collateral determines borrower quality, loan terms, access to credit and bank monitoring of business term loans. Using a differences-in-differences approach, we find that following the change in the law and the loss in collateral value borrowers pay a higher interest rate on their loans, receive a worse quality assessment by their bank, and experience a substantial reduction in the supply of credit by their bank. The reduction in collateral value also precedes a decrease in bank monitoring intensity and frequency of both the collateral and the borrower, consistent with models in which the pledging of risky assets incentivizes banks to monitor. |
| Keywords: | Collateral; credit rationing; differences-in-differences; floating lien; loan contracts; monitoring; natural experiment |
| JEL: | D82 G21 |
| Date: | 2012–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0257&r=fmk |
| By: | Joanna Janczura |
| Abstract: | In this paper analytic formulas for electricity derivatives are calculated. To this end, we assume that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition matrix. Since the classical derivatives pricing methodology cannot be used in case of non-storable commodities, we employ the concept of the risk premium. The obtained theoretical results are then used for the European Energy Exchange (EEX) market data. The 3-regime model is calibrated to the spot electricity prices. Next, the risk premium is derived and used to calculate prices of European options written on spot, as well as, forward prices. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1203.5442&r=fmk |