Financial Risk Management

Financial Risk Management

  • George Ojwang added an answer:
    4
    What criteria can I use for selecting certain African countries for a research that I intend to generalize for the continent?

    I would like to survey companies in different African countries. My idea is to conveniently select English speaking countries in Southern and Eastern Africa. Amalgamate a database of the companies from each country’s stock exchange or company registrar and randomly sample. Does this procedure suffice? I cannot find references to support or refute it. Your help with be much appreciated.

    George Ojwang

    Hi Mazambani,

    Your idea is good but too broad. Yes you could go ahead and categorize these countries based on public debt-GDP ratio, Capital market/money market development in terms of factor investment and endogeneity of corporate governance culture. But I am also of the view that politico-regulatory aspect of doing business would be a critical aspect.

    Regards,

    Ojwang' George

  • Mohammad Kamrul Ahsan added an answer:
    1
    What is the best measure for calculating the capital adequacy in LDA?
    The LDA is a special case of AMA powerful method that has been used for calculating the capital adequacy. But it is dependent to the risk measure. So, the risk measures play key roles in this approach.
    Mohammad Kamrul Ahsan

    there have huge ratios to measure capital adequacy. i prefer 'Total Equity to Total Asset'. you can use another ratios. if you want i will provide later.

  • Rajeev Dwivedi, Ph.D. added an answer:
    4
    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 ?

    Rajeev Dwivedi, Ph.D.

    It would be best to describe in terms of Project RISK MANAGEMENT PROCESS TERMS. 

  • Nabila Nisha added an answer:
    7
    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.

    Nabila Nisha

    https://www.researchgate.net/publication/286256177_Global_Financial_Crisis_Exploring_the_Special_Role_of_US_Banks_and_Regulations

    • Source
      [Show abstract] [Hide abstract]
      ABSTRACT: Financial markets have suffered the greatest dislocation following the truly seismic significance of the global financial crisis. Regulators argue that the banking sector played a particularly special role in triggering the causes of the subprime debacle, thereby leading to the occurrence of the global financial crisis. Banks previously functioned as only a financial intermediary, but certain developments in the international banking sector like deregulation, technological progress, consolidation and competition, secularization and financial innovation, resulted in banks being involved in subprime lending activities and hence, a reason behind the financial turmoil. The aim of this paper is to scrutinize the special role of banks in the global financial crisis and to stress on the need for increased regulation and their implications on the banking sector. The current study will thus contribute to the examination of the salient features of the global financial crisis and provide regulatory suggestions for the banking sector and the government as a whole.
      Full-text · Article · Mar 2016
  • Nabila Nisha added an answer:
    14
    In how far higher capital requirements for banks can be justified in developing countries?
    The higher capital requirement under Basel III will force banks to raise substantial extra capital to meet the regulatory requirements. How does one go about weighing the costs and benefits associated with higher capital requirements in the context of developing countries?
    Nabila Nisha

    https://www.researchgate.net/publication/286256177_Global_Financial_Crisis_Exploring_the_Special_Role_of_US_Banks_and_Regulations

    • Source
      [Show abstract] [Hide abstract]
      ABSTRACT: Financial markets have suffered the greatest dislocation following the truly seismic significance of the global financial crisis. Regulators argue that the banking sector played a particularly special role in triggering the causes of the subprime debacle, thereby leading to the occurrence of the global financial crisis. Banks previously functioned as only a financial intermediary, but certain developments in the international banking sector like deregulation, technological progress, consolidation and competition, secularization and financial innovation, resulted in banks being involved in subprime lending activities and hence, a reason behind the financial turmoil. The aim of this paper is to scrutinize the special role of banks in the global financial crisis and to stress on the need for increased regulation and their implications on the banking sector. The current study will thus contribute to the examination of the salient features of the global financial crisis and provide regulatory suggestions for the banking sector and the government as a whole.
      Full-text · Article · Mar 2016
  • Claudio Castagnino added an answer:
    2
    Let me know the usage and validity of OLS in estimation of General Prices of Commodities?

    Let me know the usage and validity of OLS in estimation of General Prices of Commodities?

    Claudio Castagnino

    Maybe you like to use a test to validity the depend variables for estimate price index, so you must get trusted data like mention the answer before, run in any software like Stata , test and see the result.  

  • Mohd Halim Kadri added an answer:
    4
    How can we calculate Market Value of Equity and Book Value of Total Debt from balance sheet?

    Dear all,

    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

    Mohd Halim Kadri

    1. Market value of equity MV = Market price per share P X Number of issued Ordinary share (Common Stock). It cannot be found in Balance Sheet. It is not the same as Shareholders' Fund.

    2. Book value of debt can be found in Balance Sheet i.e Long Term and Current Liabilities. Under the current financial reporting standards, companies may be required to measure their debts at fair value.

  • Faris Alshubiri added an answer:
    6
    How can I estimate the financial risk of discrete time series daily return?

    Probability and Statistics 

    Faris Alshubiri

    Dear Ahammad Hossain 

    Greetings,

    Please find the attached file may be good for you and related for your topic.
    time series:

    Best Regards,

  • Ramesh Bhat added an answer:
    4
    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?

    Ramesh Bhat

    You may refer two papers in which have examined the demand for health insurance and renewal of policies in CBHI setting in India. 

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      [Show abstract] [Hide abstract]
      ABSTRACT: Health insurance schemes are increasingly recognised as preferable mechanisms to finance health care provision. In this direction micro health insurance schemes and community based health insurance schemes are assuming significant importance in reaching large number of people. However, at the community level despite low premiums the penetration of health insurance is small. The objective of this paper is to analyse factors determining the demand for private health insurance in a micro insurance scheme setting. The study uses two-stage model to examine this issue. First, we determine the factors which affect the insurance purchase decisions and at second level we focus on studying factors which affect the amount of insurance purchase using Heckman two-stage estimation procedure. The data of this study is based on survey and collection of primary data from the Anand district of Gujarat where Charotar Arogya Mandal is offering a health insurance scheme. The results indicate that income and healthcare expenditure are significant determinants of health insurance purchase. Age, coverage of illnesses and knowledge about insurance were also found to be affecting health insurance purchase decision positively. For the decision regarding amount of health insurance purchase, income was found to be having significant but non-linear relationship. In addition, number of children in the family, age, and perception regarding future healthcare expenditure were also found to be significant. The study discusses implications of these results.
      Full-text · Article · Aug 2006

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  • Carl B. Mcgowan added an answer:
    3
    Are DFL and DOL are appropriate to measure the systematic risk?

    I would like to measure the impact of corporate governance practices impact on risk management.so i have decided to measure the risk by using DOP and DFL. Are these measures okay?

    Carl B. Mcgowan

    Our paper shows how to decompose market beta for financial leverage and operating leverage.  The remaining beta is industry beta. 

    Dondeti, V. Reddy, Carl B. McGowan, Jr. and Susan E. Moeller.  “Computing Bottom-up Betas for Companies in the Soft Drink Industry,” Journal of Business Case Studies, Fourth Quarter 2014, Volume 10, Number 4, pp. 357-362.

  • Faris Alshubiri added an answer:
    4
    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?

    Faris Alshubiri

    Dear Walid Jbili

    Greetings,

    Please find the attached file about your topic may be good foe you ,

    Best Regards,

  • Patrick Navatte added an answer:
    6
    Does a low correlation between cash flow and investment need to make a firm financially constrained?

    What is the behavior of a "high-hedging needs" firm at refinancing points? What about its profitability impact on the financial package it will choose/ accept from the bank or the market? Do you know papers on that subject?  

    Patrick Navatte

    Hi,

    This paper may be of some help:

    "Investment–cash flow sensitivity under changing information asymmetry"

    Jaideep Chowdhury , Raman Kumar , Dilip Shome ,

    Journal of Banking and Finance 2016, january, vol 62, p 28-40.

    regards

  • Taral Pathak added an answer:
    1
    How to manage the portfolio risk while we are invest through portfolio process
    Case study purposes
    Taral Pathak

    The uniqueness about the case study as a method of research or teaching is that it delves in extremely unique and specific contexts and situations and therefore I'd warn you against using any generally available solution as it may not fit the situation you are studying and therefore may give very misleading framework or direction.

  • Mahfoudh Hussein Mgammal added an answer:
    2
    Is there a reference book explaining how to implement in practice a regional EC+IO model ?

    Related to a research project, I would like to use a regional econometric input-output (EC+IO) model in order to value economic impacts coming from the implementation of offshore wind project in Brittany (Brittany is a French region). A standard input-output model values only the gross effects (in production and employment for instance), but not the net effect explained by the reduction in household consumption coming from the increase in taxation required to finance the offshore wind project. A regional EC+IO model enables to overcome this limit inherent to the standard input-output model.

    I know that there are different types of EC+IO models (see for instance the article of Rey 1998 published in International Regional Science Review). But, there may be a book explaining and summarizing the different techniques required to implement a EC+IO model (for instance econometric techniques specific for regional models, …).

    Mahfoudh Hussein Mgammal

    Hello dear please find the "Handbook of Regional and Urban Economics, vol. 5A, Volume 5A" as PDF for free from the link below:
    http://bookzz.org/book/2551753/d4f13e

    all the best

  • Alessandra Dal Colle added an answer:
    6
    Can we define remittance as a monetary variable?

    Migrant remittances are a steadily growing external source of capital for developing countries. While foreign direct investments and capital market flows fell sharply in the last years due to the recession in the lower-middle income countries, migrant remittances continued to grow.

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    Alessandra Dal Colle

    As evidenced by the papers sent by Faris Alshubiri I think the most important thing is how big remittances are with respect to domestic creation of money (i.e. open market operations and the likes)

    the paper on Haiti is a case in point....

  • Saqib Butt added an answer:
    18
    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!

    Saqib Butt

    dividend policy is basically the distribution of income among the shareholders.There are other ways through which firm can distribute its income. dividend policy may vary depending on the nature of the firm and its ownership structure. if the firm is a growing firm or in simple words a firm is expanding its business or a firm is already at its maturity stage or firms having different financing needs may affect their dividend policy  decision. And may also affect the expectations of the investors. If there is a difference between the expectations and the actual dividend then there is a possibility of information asymmetry. Event study analysis might help you in this regard.

  • Soumitra K Mallick added an answer:
    14
    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?

    • Source
      [Show abstract] [Hide abstract]
      ABSTRACT: In pricing real estate with indifference pricing approach, market incompleteness significantly distorts the conventional pricing relationships between real estate and financial asset. In this paper, we focus on the pricing implication of market comovement because comovement tends to be stronger in financial crisis when investors are especially sensitive to price declines. We find that real estate price increases with expected financial asset return but only in weak market comovement (i.e., a normal market environment) when investors enjoy diversification benefit. When market comovement is strong, real estate price strictly declines with expected financial asset return. More importantly, contrary to the conventional positive relationship, real estate price generally declines with expected financial asset risk. Even when market comovement is strong, real estate price only increases with financial asset risk when the risk is low but eventually declines with the risk when it becomes high. These nonlinear price relationships highlight the importance of asset market comovement that is usually overlooked by conventional option pricing model developed in complete market setting.
      Full-text · Article · Apr 2011 · The Journal of Real Estate Finance and Economics
    Soumitra K Mallick

    Dear Prof. Huszar,

                                    I think the financial market especially financial accounting literature which drives much of the information for asset prices is clear on this. The relevant problem to consider is that of excess volatility over and above that explained by the standard asset pricing model like the CAPM and to ask how alternative accounting disclosures can affect this excess volatility in markets. I think that is what the paper listed does. Financial Markets I believe can price correlations unless you explicitly model incomplete markets where also in the presence of options and Black Scholes Options pricing model you can have excess volatility (Polemarchakis & Ku, Journal of Mathematical Economics (1990), Mallick (2014)) on my RG webpage) where earnings disclosures can have real welfare effects on investors. I hope this discussion is useful to you. SKM QC FEPS(D)

  • Mustafa Hasan added an answer:
    4
    Can anyone share papers on the role of auditors industry specialization?

    I am going to study the effect of the auditors industry specialization on audit risk.

    Mustafa Hasan

    thank you all

  • Gary Cokins added an answer:
    13
    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

    Gary Cokins

    Eugenio ... I appreciate Pierre's reference to me in his answer. He is spot-on correct that cost drivers (which I prefer to refer to as "activity drivers" ... the lower section of a multiple-stage ABC cost assignment network) should comply with "costing's causality principle".

    I am not a faculty member or a PhD. I am a practitioner. I have implement ABC since 1988 Here is my simple rule: For each activity cost (which traditionally is referred to as a "cost pool") ask, "What would make the amount of the activity cost to significantly increase or decrease?" The answer should be "The number of XXXX." The XXXX is the activity driver. No brainstorming. Follow this rule for every activity cost, and the result will be reasonably accurate costs of the "final cost objects" (i.e., product, service-line, channel, and customer costs).

    I have attached an article I authored on ABC this year for the Institute of Management Accountants which may be useful

    Gary ... Gary Cokins

  • Alfonso A. Rojo Ramírez added an answer:
    6
    The effect on firm value of enterprise risk management: May I link the between firm value and enterprise risk management. Which methods can I apply?

    Which methods can I apply? Which variables can I choose as enterprise risk management?

    Alfonso A. Rojo Ramírez

    The value of the firm is affected by risk. Usually risk is taking into account by the discount rate. Thus, you have to look at this variable. In this sense, the minimum rate of return is a key factor. 

    I suggest to read the paper:

    Rojo Ramírez, A. A. 2014. Privately held company valuation and cost of capital. Journal of Business Valuation and Economic Loss Analysis, 9(1): 1–22.

  • S. Mostapha Kalami Heris added an answer:
    7
    What is the best software for performing financial portfolio optimization?
    Which software programs are best at performing optimization of investment portfolios? What makes the programs preferable? Please provide pros and cons if applicable.
    S. Mostapha Kalami Heris

    This an open-source implementation of Portfolio Optimization using metaheuristics in MATLAB:

    http://yarpiz.com/391/ypap112-portfolio-optimization

    However, the MATLAB itself is not free to use. You can use Octave instead of MATLAB, if you will. Maybe you have to modify the codes, to bu runnable in Octave.

  • Soumitra K Mallick added an answer:
    3
    Is there a correlation between the volume of traded credit default swap (CDS) and the actual probability of default?

    More precise: Is a company more likely to go bankrupt, if there are a lot CDS traded "betting on its default"?

    Are there any researches about statistical and causal relations? I could not find publications and I am concerned that ones can not find reliable information about the volume, as CDS are traded OTC.

    It would be great if one has an idea how to get these data or maybe knows about existing research.

    Soumitra K Mallick

    Dear Prof. Wilkes,

                                     I cannot answer your question about CDS but I can add that in the case of Indian Emerging Economy regime banks post globalisation, the bad loan assets which were swapped with regular loan assets by debt restructuring called NPA assets had an improvement in their probability of default over decades and actually when geometrically plotted showed continuous convergence by the larger banks overtaking the convergence of smaller banks, hence showing convergence by the "overtaking criterion" applied to turnpike models. You can if you want to take a look at my work with my coauthors on NPAs on my RG webpage. I hope that helps your research. SKM

  • Subhash C. Kundu added an answer:
    12
    Does media coverage of financial news affect stock market movements ?

    media coverage and analyzing news affect people reaction to and new news.

    Subhash C. Kundu

    Past research has shown mass media can influence people’s beliefs or behavior in general. Such studies are at least partly behind advertisers’ willingness to pay higher rates to ensure their spots appear in popular newspapers and magazines and on air during time slots when the largest audience is believed to be watching or listening.

    Over the years, the media has devoted more and more attention to the stock market and its key players, such as analysts. Recent research shows the media plays an important role both in the stock price formation process and in accounting settings. Such research, however, focuses primarily on firms and not analysts.

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  • Soumitra K Mallick added an answer:
    1
    Where is the state of financial risk management and financial supervision of large firms compared to six years ago?
    I have just returned from the Federal Reserve Bank of Atlanta's excellent 2013 Financial Markets Conference "Maintaining Financial Stability: Holding a Tiger by the Tail". Presenters included Fed Chairman Ben Bernanke, Professor John Taylor (Taylor Rule fame), Columbia's Professor Calomiris, Bank of England's Andy Haldane among many others. Topics included stress tests, a new proposed bankruptcy chapter for financial firms, the usefulness or otherwise of VAR, Too Big to Fail (TBTF) and Dodd-Frank.

    I came away with the impression that people don't think TBTF is fixed and that Dodd-Frank's orderly resolution authority would still lead to backdoor bailouts. That stress tests in the U.S. on banks and SiFis are improving and useful but there is room for more improvement. The push for simple rules over the complexity of Basle III is still alive. Everyone with an interest in the field should follow BoE's Haldance (Director of Financial Stability).

    Thoughts on the topic?
    Soumitra K Mallick

    With digitisation proceeding at a brisk pace information is becoming much more readily available so that you can calculate any kind of betas very quickly of course subject to certain discretionary assumptions at the top level. Hence Financial Stability has become much more a Financial Stability Algorithm problem not for.e.g. subjectivity wars problem over intrepretation of norms and statutes for e.g.

  • Mohd Halim Kadri added an answer:
    18
    Which methodologies or models can be applied to measure the quality of accounting information through the disclosure of financial statements?
    The quality shown in the financial statements accounting information (the conceptual framework of IFRS and FASB, as well as by standard-setting) is treated based on the relevance and faithful representation of the same, keeping the economic substance of the transactions summarized. To declare that it meets the IFRS or national GAAP is not enough to measure quality. Several studies conducted have focused on measuring the amount of disclosure made ​​in accordance with the standards set and asked how we can measure the quality of mandatory disclosure and also generate inferences or proxies for voluntary disclosure, such as "Theories for Disclosure" (Verrecchia) and "Relevance of Accounting Information" (Barth et al).
    Mohd Halim Kadri

    Dear Poueri Mario. One way of measuring the quality of published accounting information is by applying the value relevance methodology. See Landsman (1986), Ohlson (1995) and many other followers of this methodology for example Goodwin and Ahmed (2006) and Schiebel A (2006).

  • Patrick Navatte added an answer:
    5
    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?

    Patrick Navatte

    I try to go further,

    Are good advisers boards really bad monitors of management? In fact proximity may help trust to take place. But connected boards with the CEO may be bad monitors when it is needed. What is your feeling about that?

  • Bola Babajide added an answer:
    4
    Anyone know any database(s) that hold information about financial derivative instruments used by UK firms for hedging purposes? - Annual data please
    Need annual foreign exchange, interest rate and commodity contracts committed to by UK non-financial firms
    Bola Babajide

    Hi nkamaobong,

    There seems to be no database for the data I was looking for I resulted to firms financial statements. Depending on your Data type, you may check Thomson One Banker for aggregate derivative usage.

    Best 

  • Mohd Hafizuddin Syah Bangaan Abdullah added an answer:
    6
    The impact of Enterprise Risk Management on firm performance
    I'm interested in this topic for my PhD research but haven't look into it in deep. Can anyone advise me?
    Mohd Hafizuddin Syah Bangaan Abdullah

    modern finance theories posit that shareholder can diversified by themselves through diversification. But in the case of aggregate downfall e.g. economic crisis/ financial crisis, diversification might not works effectively or not work at all. So in my opinion, firm should implements ERM to protect its shareholder for economic aggregate downfall.

  • Mark Vaughan added an answer:
    3
    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

    Mark Vaughan

    When you are measuring regulatory capital for a financial institution this would be the case, otherwise you are free to use different categories the best match the business model.   

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