Mostafa Eidiani added an answer:Does anyone have experience with research in infrastructure finance risks?I am undertaking a research on risk in Infrastructure project finance where I have ranked questions developed for my questionnaire. My interest is to see which risks are more severe within each of the nine categories that I have profiled (ie each category has 5 sub risks). What would be the best statistical outputs to analyse this data? Besides wanting to know which risks are more severe within each risk category, I would be interested in knowing the differences in the responses between the public and private sector. Your thoughts?
Hi Dr. Paul Louangrath, Thank you for your best answer.Following
Mohd Yaziz Mohd Isa added an answer:Do we need to categorize business lines as required by Basel when measuring required capital to account for operational risk or we can customize this?
There are eight business lines when calculating required capital to account for operational risk
My take is you would need so, because in measuring capital adequacy, you would need to be able to tie specific risk emanating from specific business lines.
Amin babaei falah added an answer:How can I measure the real systematic risk in an industry where not all the related companies have published their financial reports?
Imagine I am to determine the systematic risk of pharmaceutical industry in a certain country, but more than 20 percent of the active companies have not provided their financial information. Is there any option for at least a good estimation?
But lets for the sake of argument, say that there are other good indicators for measuring the systematic risk besides Beta. How can I compare them and come to a conclusion that which indicator is showing systematic risk better in a certain short or long time horizon?Following
Fabrizio Rossi added an answer:How do I characterize a board of directors primarily focused on advising and not on monitoring?
Boards of directors have two main activities: Advising and Monitoring. The last quoted role was extensively treated in the literature. For example, the auditing committee was examined with a lot of details. But what about the advising part of the role of the board of directors? How to measure the implication of directors in the advising side of the board's activity?
In my opinion, to measure the ability of the board to advise we should investigate the background of the members of the board (previous professional experience, relational network, education, role, etc.). In other words, we should investigate the board considering a multicultural perspective. For example, one or more board members who come from the financial institutions, they will have on the one hand the right experience in the financial sector, and on the other hand, appropriate skills to dialogue with the banking industry. The gap that I have found so far, according to my humble experience, is that this aspect have been little investigated. Future research should investigate on human and relational capital of the members of the board.Following
Paul Koszarny added an answer:Should we consider at present the OTC Derivatives level a Macroeconomic threat?
Considering BIS current data on the amount of OTC derivatives contracts , the "betting game" might be valued 10 times the world GDP value.
Do you see any further finantiarization risk related to the present main Central Banks monetary policies , deferring the end of QE and low interest rates?
I entirely agree with you. The problem will become acute as soon as hot money evaporates. That's best described in the Minkovsky space how suddenly "strong" trends break and crashes follow when liquidity disappears. We have seen a harbinger already. On January 15 EURCHF crashed in the matter of a few minutes leaving a lot to think what were HFT funds doing then, actually why they disappeared from the market like the Chinese Wall in a Copperfield's trick? Prepare for the worst, the best will take care of itself. Quite recent developments on DJIA show that when the market is purposefully left by big hands to the public for a sentiment test, the index goes down quite fast. People do not give trust to the present uptrend which began from the lows of 2009. Is it supported by some crutches? I am of the opinion that we may have some new legislative initiative disallowing large leveraging when things start looking very nasty and provided there is someone who can imagine even the worst possible meltdowns underway. After all, what do you think about reducing the financial risk by onetime forced change of leveraging rules applicable to all uncovered open positions? The public would cheer to the idea and hail the saviors. I think that financial engineering tools will be considered sooner than later. Catastrophies deferred like deferred payment.
Nazeeh Ghatasheh added an answer:Risk measurement in banking - do you know any examples of classification for risk measurement?I am looking for the classification of risk measurement in banking (credit, liquidity, market, operational). I have some ideas, but maybe I am reinventing the wheel. For example, you can measure risk directly (eg. probabilities) or indirectly (LTV or maturity mismatch). Any suggestions?
You may take a look at these publicationsFollowing
Mamunur Rashid added an answer:Could you refer me some studies on micro-equity experiences (success, failures) particularly in developing countries and MENA region?
For example Micro-equity vs. microcredit? or Micro-equity vs. islamic microfinance?
Email me at firstname.lastname@example.orgFollowing
Ekow Yamoah added an answer:How do I measure the asymmetrical information between stakeholders?
In general, it is acknowledged that the managers are better informed than the shareholders. Also, controller shareholders seem to be better informed than the minority shareholders. How to measure the information asymmetry? Can we connect information asymmetry with the dividend policy of companies?
For instance, some studies prove that "Firms that pay consistently high dividends have lower insider returns than do firms that pay consistently low dividends" (e.g., Kenneth Khang and Tao-Hsien Dolly King, Financial Management, Vol. 35, No. 4, 2006).
Thank you in advance!
i will concur with the bid-ask-spread. Simply, the spread will be a good theory to measure information asymmetryFollowing
Pierre Mévellec added an answer:How can Cost Driver be identified, beside brain storming methodology?
- Identifiying Cost Driver for Activity Based Costing (ABC) in Management Accounting (for internal controlling)
- Cost Driver (in German: "Kostentreiber") in addition to Cost Type ("Kostenart"), Cost Center ("Kostenstelle") and Cost Object ("Kostenträger")
- Cost Driver as defined by AccountingCoach: http://www.accountingcoach.com/blog/what-is-a-cost-driver
I am surprise by the wording of the question.
A driver is always the expression of a law of causality. A law of causality cannot be sought by brainstorming. It is the direct expression of what is experienced by the people concerned.
It must be recognized that the literature on the ABC is sometimes ambiguous. It evokes the choice of the driver, suggesting that the options are multiple.
There are actually several options but which have nothing randomness. The analyst or project group is facing two options:
- The first relates to the quality of the desired causal relationship, and it can be put in relation with the homogeneity of the activity. If we take as an example the activity “Vendors accounting” two drivers are always cited by the accountants: the number of invoices and number of invoice lines. Referring to the words of Kaplan quoted by G. Cokins in a recent comment, the question is then whether we prefer a simple and rough driver (the number of invoices) or an accurate system requiring new data (the number of invoice lines). The choice between these two options can of course rely on a statistical analysis of the composition of the invoices. If the establishment of the ABC aims to the simple calculation of cost and local productivity measurement, one of these options will probably preferred.
- The second choice is relative to the preference for immediate (short-term) causality law or the underlying causality (long term). To continue the same example, the lines of invoices correspond to specific part numbers. The number of part number is therefore a potential driver. But it varies under the influence of factors unrelated to activity ‘Vendors accounting” but will have an indirect impact on it. If the establishment of the ABC aims to develop a transversal vision of the organization and cooperation between activities within process, this choice should be preferred.
I hope that these explanations, gained from a long field experience, will convince you that the choice of a driver is not an exercise of brainstorming but a confrontation to the field supplemented by questioning on the ambition pursued through the implementation of ABC.Following
Sergei Esipov added an answer:Can I use Real Default Probabilities in Wrong Way Risk analysis?
I am writing a master thesis and I am stuck on a question, therefore I would be more than thankful if any of you could help me.
I am modeling Wrong Way Risk. I use an over the counter forward contract between two counterparties. Let's say that I want to know how much I can lose due to my counterpart defaulting. The basic formula would be:
Probable Loss=Prob. of default*Expected Value of the contract*(1-Recovery rate)
To compute the value of the contract I use risk neutral valuation method. My issue is that I want to calibrate the probability of default from real default events, thus I will have a real world probability of default (not the one implied by the market spreads). I am allowed to do so? If no, what would be the alternative, valuing the forward contract under real world expectations?Following
Ting Fa Margherita Chang added an answer:What is the prospect of success for the "internationalization" of the Chinese currency: RMB?
China's global economic activities account for 12% of global GDP, yet the Chinese currency is used only in about 2 - 3% of global trade volumes. Currently, the US dollars, Euro and Yen still dominates the international trade scenes.
-What are the implications of the "internationalization" of RMB?
-How would the US dollar and Euro be affected?
-What challenges are/will be faced by China if RMB is internationalized?
Dear Bruno & David,
interesting is the question of the Central Bank. The Fed can make use of the monetary policy with the operation of the monetary base (increase in the money supply by buying bonds) to finance the deficit. So the US has bailed out the banks and have come out of the crisis.
Until recently, the European Central Bank could not buy the bonds to cover the deficit of the countries in crisis. The EU countries had only the lever of fiscal policy. To cover the deficit, the income and assets of households and businesses have been squeezed (very high levels of taxation). The latter, by reaction, have opted for the liquidity preference and have fallen into a liquidity trap. The result was the reduction of the velocity of circulation of money, and the deepening of the crisis with firm failures and higher unemployment.
Moral: it is not enough that there is a central bank, but it must have the power to expand the monetary base and then to do a real monetary policy. If a country do not have this power, they do not trigger neither investments nor consumptions and the Keynesian multiplier can not operate.
Have a good night.Following
B.T Matemilola added an answer:What is the effect of the securitization transactions on credit risk in an emerging economy?
There is no clear evidence regarding the effect of securitization transactions on the risk in the financial system. The literature about this subject is incipient for emerging economies and, in particular, for Latin American countries. A possible justification for this fact can be a lack of a developed financial system in these countries.
I came across a paper that argues that the effect of securitization on credit risk depends on the type of underlying assets. Securitization of mortgages, equity lines of credit and consumer loans reduce credit risk, but other types of assets appear not to have any significant impact on credit risk. See Casu et al (2011) Does securitization reduces credit risk taking? Empirical Evidence from US bank holding companies. The European Journal of Finance, 17(9-10), 769-788.Following
Sam James Henkel added an answer:Are there any empirical models incorporating risks while re-issuing a debt offering?
Many companies extend their debt maturities by re-issuing debt. Proceeds of the new debt are used to pay off existing debt. More and more companies might be tempted to follow this trend.
However, this re-issuing has certain risks involved. Are there any research papers which add some color on the above topic?Following
Samer Jabr added an answer:Any research done on the effect of CBHI in increasing health access and financial risk protection? Especially in East Africa?
Any Research done on the effect of CBHI in increasing health access and financial risk protection? Especially in East Africa?
Please see the link:
Xingbo Zhou added an answer:What are the various risks in complex construction projects and how does Integrated Project Delivery approach help in mitigating these risks?
There are various technological, organizational, legal risks that could be encountered in complex construction projects, IPD however seems to have an approach which can share risks and turn them into benefits for the projects. If that is the case, what would be the risks in complex construction projects that act as drivers for an IPD approach ?
Different model may contain different risks, such as Bishop method and Sweden method adopt different safety factor for earth dam.Following
Habtamu Asitatikie added an answer:How should one choose forecasting horizon in VAR?
How can I choose the forecast horizon during H-Step ahead forecasting in reduced VAR model using quarterly data set?
Thanks Makram.It was helpfulFollowing
Omolara Omotunde Duke added an answer:What's the meaning of detecting the cross-correlation of spot exchange rate and forward exchange rate?
I have read several papers on the cross-correlation between spot exchange rate and forward exchange rate, but find little economic meaning of that relationship.
In my opinion,export or import-company can avoid exchange rate risk by hedging with forward contracts. The central bank needs to adjust the monetary policy based on the changing relationship over time.
Any theory to analyze the meaning of spot and forward exchange rate?or any papers?
Of course there is always a link between exchange rates, besides what has been discussed above under covered and uncovered interest rate parity, the forward exchange rate carries information on the spot rate and price expectation. It is the perceived price by the economic agent that would determines the forward exchange rate. Sarno and Taylor is a good read on thisFollowing
John King'athia Karuitha added an answer:What are some of the factors that affect the adoption of risk management by smallholder farmers?
In smallholder agriculture, risk management is desirable, just like in any other business venture. Despite efforts to design schemes like agricultural insurance and other micro-insurance schemes, uptake is still low. This begs the questions:
1. What makes smallholder farmers resist formal risk management approaches- insurance, capital markets?
2. Are there cases in any country where formal risk management approaches have managed to achieve even limited success among-st smallholder farmers?
3. What informal risk management mechanisms do smallholder farmers adopt?
4. Are there better ways to design risk management mechanisms to attract smallholder farmers?
Responses are welcome
Thanks alll for the useful responseFollowing
David Fields added an answer:Is the Fed interest rate as a measure of the liquidity crisis is not appropriate?
I am using the fed rate as a proxy for Liquidity crises in US, however I had a comment that the interest rates can be used for general monetary policy purposes. So, I have to provide evidence that the Fed interest rates are not used in us from 1954 to 2011 for general monetary policy purposes, then this quantity cannot be used as a measure of liquidity crisis. Is there any thing in the literature related to this issue. what is the best proxy for liquidity crisis ( credit crunch) ?
Dear Mohammed, I am attaching my RIPE paper.Following
David Oluseun Olayungbo added an answer:In the case of chinese micro data, how does Hedging financial risks increase companies value?
Need Micro Data of the Volume of Derivative Instruments used by Chinese companies for hedging exchange rate and interest rate exposure.
Right now I look at every annual report but unfortunately some reports are only in Chinese. Is there any data already collected for the years 2010-2013 or any faster way to collect the data?
Hedging can reduce the financial risks of a company' firm value if the company has taken up investment position or arrangement to offset unforeseen financial risk such as unexpected changes in interest rates, exchange rates and other prices that can reduce the firm value. Therefore, once a firm has hedged itself of these risks then such firm value will be stable and may even increase while other firms that have not taken this step will have a reduction in their value.Following
Yuri Biondi added an answer:What are the various ways of stock or securities markets behavior?
When answering the question, I also welcome investors behavior.Following
Chris Kelly added an answer:How can we calculate Market Value of Equity and Book Value of Total Debt from balance sheet?
Please clarify my confusion on Altman ' Z score model' X4=Market Value of Equity/Book Value of Total Debt. I want to know that term market value of equity is equal to shareholder' fund or not.
Second thing is that how can we calculate Book value of total debt. Is Book value of total debt come under the head of "Borrowings/Liabilities".
Please clarify me on these two Altman' Terminologies
Just to clarify, I agree with Paul's explanation on market value of equity. But I thought in your question you wanted to know the book value of total DEBT, not the book value of equity. In your question you were correct to identify that the book value of total debt is the value given to borrowings in the liabilities section of the balance sheet.
Bear in mind Altman's z-score is based on historic empirical data relationships that seem to predict impending insolvency, so the formulas may seem a bit arbitrary and are intended to be interpreted literally. Those data relationships may not hold true today. The data may be a little out of date now especially in light of changes to accounting standards (eg IASB) and market pricing following the Global FInancial Crisis.Following
Violeta Rodríguez del Villar added an answer:How do you use package GLLMgibbs in R?I need an example for this package
BUGS seems easier and here is a free version: http://www.openbugs.net/w/FrontPageFollowing
Roland Iosif Moraru added an answer:What do you understand by Quantitative Risk Assessment?A dictionary definition says: "Quantitative Risk Assessment is Use of measurable, objective data to determine asset value, probability of loss, and associated risk(s)".
Nevertheless in various fields (Environment, Finance, Occupational Health and Safety etc) and in different countries the meaning attributed to QRA differs sometimes significantly. Being highly interested in the field I invite you to brainstorming around this question. Many professionals, researchers and experts should be interested and involved. Thank you.
I appreciate your contribution, particularly the reference to project evaluation.Following
Abdul AL added an answer:What factors contribute to SMEs in emerging markets to adopt Innovation practices?
Key Factors that are internal to firm or external to firmFollowing
Patrick Navatte added an answer:Does media coverage of financial news affect stock market movements ?
media coverage and analyzing news affect people reaction to and new news.
For example, in mergers and acquisitions, media coverage impact of financial news may be very important, and immediate, since the stock market is supposed efficient in a semi-strong form. But if thje media coverage of the news is very low, we are facing an asymmetry of information, and the equilibrium stock price may be different.Following
Victor Dragota added an answer:What do you think of the "health" of the Capital Asset Pricing Model?
The CAPM is based on a robust theoretical framework, but empirically demonstrated weakness. The beta does not seem to be the only factor that can explain the risk-return relationship. Do you really think that the CAPM is dead?
I think that this paper provides some interesting viewpoints regarding this issue:
David Nawrocki, Fred Viole- "Behavioral finance in financial market theory, utility theory, portfolio theory and the necessary statistics: A review", Journal of Behavioral and Experimental Finance, 2 (2014) 10–17.Following
L. Spadafora added an answer:How can I manage too much volatility? What are the pricing implications?
We provide some insight and concerns about cross asset portfolio diversification in relation with increased market volatility. While generally across asset diversification reduces volatility, we need to re-calibrate models (reassign correlation values). What should we consider the general correlation between asset classes?
I am not sure that this paper will answer your question, maybe it could give you some insight. It explains the differences between implied and realized volatility and their effect on P&L and pricing.Following
Muhammad Jam e Kausar Ali Asghar added an answer:If alpha should be zero (based on CAPM), would a FAMA-FRENCH 3 factor model explain your observations above more effectively?Alpha is a risk-adjusted measure of active return on an investment.
The FF 3 factor model is emerging 2 classes of stock with CAPM to reflect a portfolio's theory.
r - Rf = beta3 x ( Km - Rf ) + bs x SMB + bv x HML + alpha
Alpha Coefficient can show that in an efficient market, the expected value of the alpha coefficient is zero. Therefore the alpha coefficient indicates how an investment has performed after accounting for the risk it involved:
Alpha_i < 0 : the investment has earned too little for its risk (or, was too risky for the return)
Alpha_i = 0 : the investment has earned a return adequate for the risk taken
Alpha_i > 0 : the investment has a return in excess of the reward for the assumed risk
You need to rephrase your questionsFollowing
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