Academic literature on the topic 'Liquidity funding risk'
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Journal articles on the topic "Liquidity funding risk"
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Zhang, Dewei, Chongfeng Wu, and Chunyang Zhou. "Optimal liquidity reserve with funding liquidity risk." Applied Economics Letters 20, no. 16 (November 2013): 1449–52. http://dx.doi.org/10.1080/13504851.2013.826860.
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Dahir, Ahmed Mohamed, Fauziah Binti Mahat, and Noor Azman Bin Ali. "Funding liquidity risk and bank risk-taking in BRICS countries." International Journal of Emerging Markets 13, no. 1 (January 15, 2018): 231–48. http://dx.doi.org/10.1108/ijoem-03-2017-0086.
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Purpose The purpose of this paper is to examine the effects of funding liquidity risk and liquidity risk on the bank risk-taking. Design/methodology/approach This study employs a system generalized method of moments (GMM) estimation technique and a sample of 57 banks operating in BRICS countries over the period from 2006 to 2015. Findings The results reveal that liquidity risk has a significant and negative effect on the bank risk-taking, indicating that a decrease in liquidity risk contributes to higher bank risk-taking. The study also reveals that funding liquidity risk has the substantial impact on bank risk-taking, suggesting lower funding liquidity risk results in higher bank risk-taking. These results are consistent with prior assumptions. Research limitations/implications The implications of this study highlight the fact that liquidity risk is a risk factor which drives the potential bank default, of which banks tend to take more risks when higher funding liquidity exists. Practical implications This study offers a number of valuable implications for the policy makers as well as practitioners. The policy makers should take into account better liquidity risk management framework aimed at preventing banks from taking excessive risks. Bank executives must pay more attention on how banks could hold more liquid securities and cash. Less risk-taking reduces higher borrowing costs undermining earnings through imposing taxes on corporate. Originality/value This work uncovered that liquidity risk per se is an important and previously unidentified risk factor, specifically its effects on bank risk-taking and contributes to the view in support of holding more liquid securities than the past.
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Chen, Wei, and Jimmy Skoglund. "Optimal hedging of funding liquidity risk." Journal of Risk 16, no. 3 (February 2014): 85–111. http://dx.doi.org/10.21314/jor.2014.292.
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Petersen, M. A., B. De Waal, J. Mukuddem-Petersen, and M. P. Mulaudzi. "Subprime mortgage funding and liquidity risk." Quantitative Finance 14, no. 3 (January 10, 2012): 545–55. http://dx.doi.org/10.1080/14697688.2011.637076.
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Drehmann, Mathias, and Kleopatra Nikolaou. "Funding liquidity risk: Definition and measurement." Journal of Banking & Finance 37, no. 7 (July 2013): 2173–82. http://dx.doi.org/10.1016/j.jbankfin.2012.01.002.
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Khan, Muhammad Saifuddin, Harald Scheule, and Eliza Wu. "Funding liquidity and bank risk taking." Journal of Banking & Finance 82 (September 2017): 203–16. http://dx.doi.org/10.1016/j.jbankfin.2016.09.005.
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Abbas, Faisal, Shoaib Ali, Imran Yousaf, and Wing-Keung Wong. "Dynamics of Funding Liquidity and Risk-Taking: Evidence from Commercial Banks." Journal of Risk and Financial Management 14, no. 6 (June 21, 2021): 281. http://dx.doi.org/10.3390/jrfm14060281.
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The purpose of this study is to investigate the impact of funding liquidity risk on the banks’ risk-taking behavior. To test the hypotheses, we apply the two-step system GMM technique on US commercial banks data from 2002 to 2018. We find that funding liquidity increases the banks’ risk-taking of US commercial banks. Furthermore, banks with higher deposits are less likely to face a funding shortage, and bank managers’ aggressive risk-taking activity is less likely to be monitored. Our findings infer that increases in bank funding liquidity increase both risk-weighted assets and liquidity creation, and deposit insurance creates a moral risk issue for banks taking excessive risks in response to deposit rises. The relationship between funding liquidity and the banks’ risk-taking varies with their capitalization and market conditions; the impact of funding liquidity on risk-taking is pronounced for well-capitalized banks and the Global Financial Crisis 2007. Our tests are robust for the usage of alternate proxy of funding liquidity and by controlling economic conditions. The findings of this study have implications for regulators to develop guidelines for the level of liquidity and risk-taking of commercial banks.
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Chen, Yi-Kai, Chung-Hua Shen, Lanfeng Kao, and Chuan-Yi Yeh. "Bank Liquidity Risk and Performance." Review of Pacific Basin Financial Markets and Policies 21, no. 01 (January 18, 2018): 1850007. http://dx.doi.org/10.1142/s0219091518500078.
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This study employs an alternative measure of liquidity risk to investigate its determinants by using an unbalanced panel dataset of commercial banks in 12 advanced economies over the period 1994–2006. Dependence on liquid assets for external funding, supervisory and regulatory factors, and macroeconomic factors are all determinants of liquidity risk. Because of higher funding costs for obtaining liquidity, liquidity risk is regarded as a discount for bank profitability, yet liquidity risk shows a premium on bank performance in terms of banks’ net interest margins. Liquidity risk has reverse impacts on bank performance in a market-based financial system.
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Schmitt, Eugenia. "Liquidity Gap Report for Stress Testing Structural Liquidity Risk." GIS Business 12, no. 6 (December 18, 2017): 43–53. http://dx.doi.org/10.26643/gis.v12i6.3313.
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The need to focus on banks funding structure and stress testing in an explicit way arose as a consequence of the crisis of past decades. Liquidity risks usually occur as a consequence of other kinds of risks, hence analysing scenarios in a prospective manner is essential for the assessment if the bank can fulfill its obligations as they come due and if its funding costs are appropriate. The structural liquidity risk and the degree of the liquidity mismatch can be measured based on the liquidity gap analysis, where expected cash-in- and outflows, divided in different time-buckets are depicted. The liquidity gap report (LGR) shows if a liquidity shortcoming appears in the future and how high is the amount a bank would have to pay, if any hedging were not possible. This paper shows how to build a comprehensive LGR which is the base for both, liquidity and wealth risk evaluation. To improve the accuracy of the forecast, the counterbalancing capacity will be incorporated into the LGR. This tool is a methodological basis for quantitative and qualitative risk assessment and stress testing.
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Dang, Van Dan. "The Basel III net stable funding ratio and a risk-return tradeoff: Bank-level evidence from Vietnam." Asian Academy of Management Journal of Accounting and Finance 17, no. 2 (December 10, 2021): 247–74. http://dx.doi.org/10.21315/aamjaf2021.17.2.10.
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The Net Stable Funding Ratio (NSFR) liquidity rule under Basel III guidelines is designed to handle long-term liquidity risk, promoting the sustainable structures of bank funding. This study estimates the NSFR and analyses the impact of this liquidity ratio on banks according to a risk-return trade-off in Vietnam prior to the Basel III implementation. Using yearly data for commercial banks from 2007 to 2018, I find that banks with higher NSFR gain more potential benefits than banks with lower NSFR. Concretely, a rise in NSFR increases bank profitability and decreases bank funding costs, credit risks and liquidity creation, as evidenced by a comprehensive set of alternative measures. The findings of this study offer insightful implications on the bank policy framework advocating the Basel III liquidity regulation in Vietnam as well as other emerging markets.
Dissertations / Theses on the topic "Liquidity funding risk"
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Ritchie, Iain Fraser. "Funding liquidity risk and fund transfer pricing in banking." Thesis, Heriot-Watt University, 2016. http://hdl.handle.net/10399/3273.
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Funding liquidity risk was one of the main reasons for bank failure during the global financial crisis in 2007-2008. New legislation has been released in the form of Basel III, in particular the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR), to strengthen the liquidity requirements for banks; this makes funding liquidity a very important topic for banks. In this thesis, I will study the important factors that need to be taken into consideration when dealing with liquidity risk and how a bank can manage their funding liquidity risk. A key concept used in banks is Fund Transfer Pricing (FTP). This approach helps the banks to manage their interest rate risk. I will investigate how funding liquidity risk can be incorporated into this framework. It is important that this approach will still maximise the bank's overall profits. In order to achieve this I will initially evaluate a one time period model. This shows whether the bank's overall profits can be optimised using FTP. My results show that it is possible to allow each business unit to work independently and that, by using FTP, individual business units can be optimised consistently with the bank's overall profits. However, for this to occur, it is important to decide whether a bank is deposit rich or deposit poor as an incorrect assumption will lead to sub-optimal profits for the bank. Banks work in more than 1 time period; therefore, I will assess how the model can be extended and how FTP would work over multiple time periods. One major consideration is to account for the uncertainty regarding the timing of cash flows. This is because customers often have the option to prepay loans or withdraw their deposits. I will investigate an approach for calculating the cost of these options and how this can be included in the FTP framework. By applying a cost to the uncertainty, we can insure that the business units are incentivised in the correct way while still maximising the profits of the bank. Under my approach the treasury unit will be exposed to actual events in return for receiving a fair value for the cost of the option. The business units will be charged the cost of the option. There is potential for one party to act in their own interest by changing the value of the option. However, as both parties need to agree, this risk should be removed over time. I have shown how this can be done over 2 time periods but further research is needed to investigate over more time periods.
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Zonke, Khaya. "An analysis of funding liquidity risk in the South African banking system." Master's thesis, University of Cape Town, 2013. http://hdl.handle.net/11427/29022.
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Most emerging markets are faced with the predicament of a misalignment, or mismatch, of assets and liabilities in the banking sector where long-term assets are funded by short-term deposits. The South African (SA) banking sector also faces a challenge regarding the composition of the short-term deposits that fund these assets. The large and unstable wholesale funds dominate the funding side of local banks' balance sheets, particularly in the short-term bucket. The danger with wholesale funds arises when they are withdrawn unexpectedly, due to either perceived or realised risk. Due to their bulk, the wholesale funds have the potential to create a funding liquidity risk crisis in a bank. Most banks are unlikely to match these types of withdrawals, and will therefore have a forced asset fire sale to fund them. Retail funds do not face this danger, as it is highly unlikely, in normal market conditions, which many retail depositors would want to withdraw all their funds at the same time. Furthermore, retail funds are a cheaper source of funding compared to wholesale funds, thus making them a bank's preferred source of funding. In as much as they are a preferred source of funding, in the SA banking system retail deposits are very low compared to wholesale funding. This research study explores the funding liquidity risk and the predicament that exists in the SA banking industry by highlighting its main sources, and providing recommendations on how it can be addressed. This is achieved by testing the relationship between the ratio of retail funding to total bank funding (ROBF) and five explanatory variables, namely: household saving rates; retail deposit rates; corporate saving rates; wholesale deposit rates; and the Johannesburg Stock Exchange (JSE) All Share Index, with the aid of the multiple regression analysis method. The regression analysis was performed on data collected between 2002 and 2011. The research established that household saving rates and retail deposit rates were predictors that were statistically significant in explaining the movement in the ratio of retail funding to total funding.
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Edney, Peter Robert. "Liquidity Risk and Bank Regulation: Basel III and Beyond." Thesis, The University of Sydney, 2014. http://hdl.handle.net/2123/13356.
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Liquidity transformation is a pre-eminent function of the banking system. By utilising at-call deposits to fund long-term and illiquid loans, and by making funds available to depositors and borrowers upon demand, banks contribute to economic welfare. However, liquidity transformation exposes banks to significant risks. As banks do not choose to hold socially optimal liquidity exposures on their own, bank regulations are an important tool for enhancing the safety of individual banks and improving the stability of the financial system. This thesis sheds new light on the causes of liquidity risk by examining the supervisory liquidity risk ratings of Australian deposit-taking institutions. It is shown that liquidity risk ratings are predictable and that the Basel III liquidity regulations are likely to reduce risk in the banking system. By conducting the first microeconomic cost-benefit analysis of the Basel III liquidity standards, this thesis also illustrates that the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) have net social benefits under a range of reasonable assumptions. This is particularly important as past macroeconomic cost-benefit analyses of Basel III liquidity standards are shown to be misspecified and potentially spurious. JEL Classification: G28, G21
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Azzouzi, Idrissi Youssef. "La liquidité bancaire : risques, thésaurisation et dimension systémique." Thesis, Grenoble, 2014. http://www.theses.fr/2014GRENG010.
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Cette thèse s'inscrit dans le contexte d'après crises des subprimes et des dettes souveraines européennes. Il s'agit de périodes durant lesquelles les banques, en particulier dans la zone Euro et aux Etats-Unis, ont fait face à un assèchement de liquidité sans précédent ayant paralysé le système bancaire et conduit à la faillite de banques dont certaines solvables. La thèse cherche à répondre à la problématique suivante : Quelles sont les raisons du dysfonctionnement de deux canaux importants d'approvisionnement en liquidité par les banques, à savoir, le marché des actifs et surtout le marché monétaire interbancaire ? L'objectif est d'avoir un cadre d'analyse qui permet d'évaluer les propositions de la réglementation Bâle III en matière de contrôle du risque de liquidité dans les banques et d'éclairer les réflexions autour de la supervision bancaire. La première étude empirique est consacrée aux interactions entre le risque de liquidité de financement et le risque de liquidité de marché en situation de crise. Elle confirme bien la présence d'un renforcement mutuel entre ces deux types de risque dans les cas américain et européen durant la période allant de 2007 à 2011. La deuxième étude empirique se focalise sur le dysfonctionnement du marché monétaire interbancaire dans la zone Euro durant la même période en identifiant les motifs de la thésaurisation de liquidité par les banques, à savoir, le risque de contrepartie, le motif de précaution et le motif de spéculation. Les résultats montrent bien qu'il y a une relation significativement positive entre ces trois facteurs et la thésaurisation. Enfin, la troisième étude met l'accent sur les conséquences de la thésaurisation en termes de contagion interbancaire et de risque systémique. Les résultats confirment en effet l'impact de la thésaurisation sur le risque systémique dans la zone EuroDuring the U.S subprimes and the European sovereign debt crisis, banks faced with an unprecedent liquidity drying-up, leading to a banking system paralysis and failures of banks (including some solvable banks), in particular in United States and Euro zone. This dissertation seeks to answer the following question: what are the reasons of dysfunction of two important channels of liquidity supply of banks, namely, asset market and interbank money market? The aim is to have an analysis framework in order to evaluate banking regulations issued by Basel III and to enlighten reflections about banking supervision. The first empirical study examines the interactions between funding liquidity risk and market liquidity risk. Its results confirm that these two risk types are mutually reinforcing in American and European cases during the period between 2007 and 2011. The second empirical study focuses on the failure of the interbank market in Euro zone during the same period by identifying the motives behind the bank liquidity hoarding, namely, counterparty risk, precautionary motive and speculative motive. The results show that there is a significantly positive relation between these three factors and the liquidity hoarding. Finally, the third empirical study illustrates the repercussions of this phenomenon on systemic risk. The results confirm the impact of liquidity hoarding on systemic risk in Euro zone
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Saroyan, Susanna. "Essays on the European interbank market in times of crisis." Thesis, Toulouse 1, 2016. http://www.theses.fr/2016TOU10070.
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Cette thèse étudie les conditions d’accès des banques européennes au financement interbancaire non sécurisé entre 2006 et 2012. Elle contient trois essais empiriques explorant des micro-données relatives aux transactions interbancaires. La première étude empirique adopte une approche en termes de paires banque prêteuse/banque emprunteuse et montre que, une fois le risque de contrepartie et les imperfections de marché contrôlées, les banques ayant un risque de liquidité plus élevé paient une prime de taux d’intérêt. Nous montrons également que cette prime est augmentée par les banques disposant d’excès de liquidités, sans doute motivées par la thésaurisation ou des stratégies de “short-squeezing” des banques en besoin de liquidité. Cette étude souligne finalement l’imperfection du marché interbancaire et l’importance des diverses interventions de la BCE qui ont cherché à réduire le risque de liquidité des banques au cours de la crise. La seconde étude, par le biais d’un model 2P-FRM, explore empiriquement l’impact des relations de clientèle entre banques sur la structure de maturité de la dette interbancaire. Les résultats dévoilent que l’accès aux prêts interbancaires longs et non sécurisés est facilité par les relations durables avant et durant les périodes de stress. Cependant, lors des moments aigus de la crise suivant la chute de la banque Lehman, ces effets positifs des variables bilatérales de relations fortes, calculées comme la concentration des actifs sur une banque emprunteuse, ne sont pas là. La deuxième partie de notre modèle montre que la part en volume des crédits à terme est plus faible pour les couples de banques partenaires. Finalement, notre variable unilatérale de relation interbancaire, qui mesure la concentration du réseau d’emprunt de la banque prêteuse, s’avère impacter négativement les prêts à terme post-Lehman. Cela confirme l’hypothèse que le propre risque de refinancement court du prêteur peut être l’origine du gel post-Lehman des prêts interbancaires à terme. Finalement, le troisième essai explore le lien entre la segmentation du marché interbancaire et le noeud de corrélation des risques souverains/bancaires. En utilisant les changements des primes des CDS souverains et bancaires, nous proposons une mesure originale de corrélation partielle des spillovers souverains-banques, qui permet d’attribuer une direction pays-banques à la contagion. Les résultats montrent que ces spillovers accentuent la segmentation du marché monétaire Italien lors de la phase critique de la crise des dettes souveraines. De plus, l’étude montre que, même si l’impact pays d’origine/banques est important, la contagion venant d’autres souverains en crise est loin d’être négligeableThis thesis studies European banks’ terms to access to unsecured interbank funding during the period 2006 to 2012. It contains three empirical essays exploring micro-data on interbank transactions. The first empirical study adopts a bank pair panel approach evidencing that, once counterparty risk and other market imperfections are controlled for, banks with higher funding liquidity risk (liquidity-short banks) pay an interest rate premium. The bank pair level analysis also permits to show that this premium is charged by liquidity-long banks, probably motivated by strategic short-squeezing or prudential hoarding purposes during the crisis. This study emphasizes the imperfection of interbank markets and the importance of theECB’s emergency interventions dedicated to dampening banks’ funding risk concerns. The second essay explores empirically the impact of relationship lending on the interbank debt maturity structure of banks by mean of a two-part fractional response model. The findings show that durable bilateral liquidity partnerships can positively impact the probability of contracting term loans before and during periods of acute stress. The positive effects of the bilateral relationship lending variable measured as asset-side concentration, is however, not straightforward, especially after the Lehman default. The second part of our model shows that the post-Lehman maturity shift is pronounced for partner banks. Finally, we find that our unilateral (lender level) relationship variable impacts negatively long term lending confirming the rollover risk viewpoint of the term interbank market freeze. Finally, the third essay investigates the link between interbank market segmentation and bank–sovereign risk nexus. Using bank and country CDS spread changes it suggests an original partial correlation based measurement of sovereign/bank spillovers providing us with a direction of contagion. Empirical findings from this part of the thesis evidence that bank-sovereign risk correlation is a significant source of fragmentation during the most acute phase of the sovereign debt crisis. Moreover, the study shows that, even if home country/bank ties impact seriously interbank market integration, the risk from other distressed countries is far from negligible
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DEGHI, ANDREA. "Essays on Interbank Formation and the Implications of Financial Structure." Doctoral thesis, Università di Siena, 2017. http://hdl.handle.net/11365/1009240.
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As the events of the 2007 Crisis unfolded, it was clear that the failure or even rumors about the failure of one single institution could trigger freezes in numerous capital markets and widespread default in other financial institutions. How this was brought about, however, was everything but clear. Ten years later, as we stand today, the literature has progressed but many questions remain unresolved.
The first question at hand is of course how banks were related and how these bilateral relationships were able to act as a passage of contagion. On the liability side, borrowing between banks provides liquidity insurance against their idiosyncratic shocks. In bad times however, insurance networks malfunctioned, and more centrally connected banks were able to monopolize on their market power to secure a larger surplus in the scramble for liquidity. My first paper further explores the relationship between network position and the ability to hoard liquidity.
In addition, assets on bank balance comprise another important channel of contagion and one should ask to which extent cross holding of asset portfolios is optimal. When does the benefit from diversification over idiosyncratic risks dominate? And when does market risk increase systemic risk of common portfolio holdings? The second essay analyzes these questions from the perspectives of private and social welfare. In the end, one must also wonder how these networks were formed at the beginning and how the endogenous formation correlates with the structural implications. The third paper takes a step back and begins with a world where banks optimally choose links, prices and the amounts of trade. This endogenously determined network structure then serves as a coherent laboratory for understanding various frictions in the interbank market such as market freezes.
Financial networks are complex and so is the research about them. Hence, in this thesis, I have attempted to shed light on them from various angles, utilizing both bilateral network data as well as theoretical analytical tools. It is my hope that taken together, this set of essays can contribute to a holistic understanding of interconnectedness in financial market.
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Yan, Meilan. "An assessment of UK banking liquidity regulation and supervision." Thesis, Loughborough University, 2013. https://dspace.lboro.ac.uk/2134/12666.
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This thesis assesses UK banking liquidity regulation and supervision and the Basel liquidity requirements, and models banks' liquidity risk. The study reveals that the FSA's risk-assessment framework before 2008 was too general without specifically considering banks' liquidity risk (as well as its failures on Northern Rock). The study also lists the limitations of the FSA's banking liquidity regimes before 2008. The thesis reviews whether the FSA's new liquidity regimes after 2008 would have coped with UK banks' liquidity risks if they have been applied properly. The fundamental changes in the FSA's liquidity supervision reflect three considerations. First, it introduces a systemic control requirement by measuring individual fifirm's liquidity risk with a market-wide stress or combination of idiosyncratic and market-wide stresses. Second, it emphasizes the monitoring of business model risks and the capability of senior managers. Third, it allows both internal and external managers to access more information by increasing the liquidity reporting frequencies. The thesis also comments on the Basel Liquidity Principles of 2008 and the two Liquidity Standards. The Principles of 2008 represents a substantial revision of the Principles of 2000 and reflect the lessons of the fifinancial market turmoil since 2007. The study argues that the implementation of the sound principles by banks and supervisors should be fexible, but also need to be consistent to make sure they understand banks' liquidity positions quite well. The study also explains the composition of the Basel liquidity ratios as well as the side effect of Basel liquidity standards; for example, it will reshape interbank deposit markets and bond markets as a result of the increase in demand for `liquid assets' and `stable funding'. This thesis uses quantitative balance sheet liquidity analysis, based upon modified versions of the BCBS (2010b) and Moody's (2001) models, to estimate eight UK banks' short and long-term liquidity positions from 2005 to 2010 respectively. The study shows that only Barclays Bank remained liquid on a short-term basis throughout the sample period (2005-2010); while the HSBC Bank also proved liquid on a short-term basis, although not in 2008 and 2010. On a long-term basis, RBS has remained liquid since 2008 after receiving government support; while Santander UK also proved liquid, except in 2009. The other banks,especially Natwest, are shown to have faced challenging conditions, on both a short-term and long-term basis, over the sample period. This thesis also uses the Exposure-Based Cash-Flow-at-Risk (CFaR) model to forecast UK banks' liquidity risk. Based on annual data over the period 1997 to 2010, the study predicts that by the end of 2011, the (102) UK banks' average CFaR at the 95% confidence level will be -£5.76 billion, Barclays Bank's (Barclays') CFaR will be -£0.34 billion, the Royal Bank of Scotland's (RBS's) CFaR will be -£40.29 billion, HSBC Bank's (HSBC's) CFaR will be £0.67 billion, Lloyds TSB Bank's (Lloyds TSB's) CFaR will be -£4.90 billion, National Westminister Bank's (Natwest's) CFaR will be -£10.38 billion, and Nationwide Building Society's (Nationwide's) CFaR will be -£0.72 billion. Moreover, it is clear that Lloyds TSB and Natwest are associated with the largest risk, according to the biggest percentage difference between downside cash flow and expected cash flow (3600% and 816% respectively). Since I summarize a bank's liquidity risk exposure in a single number (CFaR), which is the maximum shortfall given the targeted probability level, it can be directly compared to the bank's risk tolerance and used to guide corporate risk management decisions. Finally, this thesis estimates the long-term United Kingdom economic impact of the Basel III capital and liquidity requirements. Using quarterly data over the period 1997:q1 to 2010:q2, the study employs a non-linear-in-factor probit model to show increases in bank capital and liquidity would reduce the probability of a bank crisis significantly. The study estimates the long-run cost of the Basel III requirements with a Vector Error Correction Model (VECM), which shows holding higher capital and liquidity would reduce output by a small amount but increase bank profitability in the long run. The maximum temporary net benefit and permanent net benefit is shown to be 1.284% and 35.484% of pre-crisis GDP respectively when the tangible common equity ratio stays at 10%. Assuming all UK banks also meet the Basel III long-term liquidity requirements, the temporary net benefit and permanent net benefit will be 0.347% and 14.318% of pre-crisis GDP respectively. Therefore, the results suggest that, in terms of the impact on output, there is considerable room to further tighten capital and liquidity requirements, while still providing positive effects for the United Kingdom economy.
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Huang, Qiping. "ESSAYS ON HEDGE FUND TRADING AND PERFORMANCE." UKnowledge, 2018. https://uknowledge.uky.edu/finance_etds/8.
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In the first essay, I create a hedge fund informed trading measure (ITM) that separates information related trades from liquidity driven trades. The results indicate that ITM predicts future stock returns at the trade level, thus is associated with information. By aggregating the most informed trades at the stock level, I find that stocks heavily purchased by informed hedge funds earn a significant alpha. The results indicate that the ITM performs better than some previously documented measures and is robust to two different versions of the measure. The second essay exploits the expiring nature of hedge fund lockups to create a new, within-fund proxy of funding liquidity risk. When funds have lower funding liquidity risk, risk-adjusted performance improves and exposure to tail risk increases. We use fund fixed-effect, a placebo approach, and a regression discontinuity design to establish a link between funding liquidity risk and the ability of funds to capitalize on risky mispricing. The third essay explores hedge fund managers ability to identify and trade on stock mispricing opportunity. We refer to the amount of capital that are is locked up and refrained from redemption as the stable capital, and study how it affects stock mispricing. We find that when funds have more lockup capital, they are more likely to take mispricing risks. Taking all funds together, more stable capital in the industry is driving the reduction or even correction of market-wide stock mispricing. Underpriced stocks benefit more than overpriced stock from hedge funds stable capital.
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De, Waal Bernadine. "Stochastic optimization of subprime residential mortgage loan funding and its risks / by B. de Waal." Thesis, North-West University, 2010. http://hdl.handle.net/10394/4396.
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The subprime mortgage crisis (SMC) is an ongoing housing and nancial crisis that was
triggered by a marked increase in mortgage delinquencies and foreclosures in the U.S. It
has had major adverse consequences for banks and nancial markets around the globe
since it became apparent in 2007. In our research, we examine an originator's (OR's)
nonlinear stochastic optimal control problem related to choices regarding deposit inflow
rates and marketable securities allocation. Here, the primary aim is to minimize liquidity
risk, more speci cally, funding and credit crunch risk. In this regard, we consider two
reference processes, namely, the deposit reference process and the residential mortgage loan
(RML) reference process. This enables us to specify optimal deposit inflows as well as
optimal marketable securities allocation by using actuarial cost methods to establish an
ideal level of subprime RML extension. In our research, relationships are established in
order to construct a stochastic continuous-time banking model to determine a solution for
this optimal control problem which is driven by geometric Brownian motion.
In this regard, the main issues to be addressed in this dissertation are discussed in Chapters
2 and 3.
In Chapter 2, we investigate uncertain banking behavior. In this regard, we consider
continuous-time stochastic models for OR's assets, liabilities, capital, balance sheet as well
as its reference processes and give a description of their dynamics for each stochastic model
as well as the dynamics of OR's stylized balance sheet. In this chapter, we consider RML
and deposit reference processes which will serve as leading indicators in order to establish
a desirable level of subprime RMLs to be extended at the end of the risk horizon.
Chapter 3 states the main results that pertain to the role of stochastic optimal control in
OR's risk management in Theorem 2.5.1 and Corollary 2.5.2. Prior to the stochastic control
problem, we discuss an OR's risk factors, the stochastic dynamics of marketable securities
as well as the RML nancing spread method regarding an OR. Optimal portfolio choices
are made regarding deposit and marketable securities inflow rates given by Theorem 3.4.1
in order to obtain the ideal RML extension level. We construct the stochastic continuoustime
model to determine a solution for this optimal control problem to obtain the optimal
marketable securities allocation and deposit inflow rate to ensure OR's stability and security.
According to this, a spread method of RML financing is imposed with an existence condition given by Lemma 3.3.2. A numerical example is given in Section 3.5 to illustrates the main issues raised in our research.Thesis (M.Sc. (Applied Mathematics))--North-West University, Potchefstroom Campus, 2011.
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Diabate, Alassane. "Liquidity risk and fair value accounting : implications for banks capital structure, lending and stability." Thesis, Limoges, 2020. http://www.theses.fr/2020LIMO0002.
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Cette thèse comprend trois essais empiriques fondés sur des données de banques commerciales américaines. Elle vise à mettre en évidence les implications du risque de liquidité et de la comptabilisation à la juste valeur sur la structure du capital, les prêts et la stabilité des banques. Ainsi, le premier chapitre examine si les épisodes de pénurie de liquidité sur le marché influencent l'ajustement de la structure du capital des banques. Les résultats révèlent que seules les petites banques réagissent à de tels épisodes en augmentant leur ratio de capital. Pour ce faire, elles réduisent la part des prêts dans le total de l’actif, diminuent la part des actifs ayant une pondération de risque plus élevée et réduisent la taille de leur bilan. Ces résultats donnent à penser que les exigences en matière de liquidité pourraient être redondantes pour les petites banques, mais semblent nécessaires pour les grandes banques. Le deuxième chapitre analyse si l’impact d'un flux inattendu de dépôts sur la création de prêts dépend du degré d'exposition des banques au risque de liquidité provenant du hors bilan. Les résultats montrent que seules les petites banques augmentent leurs prêts lorsqu'elles sont soumises à des entrées de dépôts imprévues. Cette augmentation des prêts dépend de leur degré d'exposition au risque de liquidité découlant de leurs activités de hors bilan. Les petites banques plus exposées à ce risque de liquidité ont tendance à accorder moins de nouveaux prêts. Ces résultats indiquent que les entrées inattendues de dépôts pourraient ne pas être aussi facilement redistribuées aux emprunteurs. Le troisième chapitre examine l'effet des actifs de niveau 2 et de niveau 3 détenus par les banques sur la prise de risque et le risque d'insolvabilité. Les résultats révèlent que les banques ayant des proportions plus importantes d'actifs de niveau 2 et de niveau 3 prennent des risques plus élevés et sont plus exposées au risque d'insolvabilité. Ces résultats suggèrent que le système bancaire pourrait devenir plus fragile lorsque les investisseurs perçoivent des problèmes de fiabilité au niveau des actifs bancairesThis thesis comprises three empirical essays based on U.S. commercial banks’ data. It aims to highlight the implications of liquidity risk and fair value accounting on banks’ capital structure, lending and their stability. Thus, the first chapter investigates if episodes of liquidity squeeze on the market affect banks’ capital structure adjustment. The findings reveal that only small banks react to such episodes by increasing their capital ratio. To do so, they reduce the share of loans in total assets, decrease the share of assets with higher risk weights and they downsize their overall balance sheets. These results suggest that liquidity requirements might be redundant for small banks but appear to be necessary for large banks. The second chapter analyses whether the impact of an unexpected flow of deposits on loan origination depends upon the degree of banks’ off-balance sheet funding liquidity risk exposure. The results show that only small banks increase their lending when they are subject to unexpected deposit inflows. The increase in lending depends on how much they are exposed to funding liquidity risk stemming from their off-balance sheets. Small banks more exposed to such funding liquidity risk tend to extend fewer new loans. These results indicate that unexpected deposit inflows might not as easily be fueled again to borrowers. The third chapter examines the effect of banks’ holdings of Level 2 and Level 3 fair value assets on risk-taking and insolvency risk. The results reveal that banks with larger proportions of Level 2 and Level 3 fair value assets take on higher risk and are more exposed to insolvency risk. These findings suggest that the banking system may become more fragile when investors perceive reliability concerns in banks’ assets
Books on the topic "Liquidity funding risk"
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Banks, Erik. Liquidity Risk: Managing Asset and Funding Risks. Basingstoke: Palgrave Macmillan, 2004.
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Banks, E. Liquidity Risk: Managing Asset and Funding Risks. Palgrave Macmillan, 2005.
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Banks, Erik. Liquidity Risk: Managing Funding and Asset Risk. Palgrave Macmillan, 2013.
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Banks, E. Liquidity Risk: Managing Funding and Asset Risk. Springer, 2013.
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Banks, E. Liquidity Risk: Managing Funding and Asset Risk. Palgrave Macmillan Limited, 2013.
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Banks, E. Liquidity Risk: Managing Funding and Asset Risk. Palgrave Macmillan Limited, 2014.
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Soprano, A. Liquidity Management: A Funding Risk Handbook. Wiley & Sons, Limited, John, 2015.
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Soprano, Aldo. Liquidity Management: A Funding Risk Handbook. Wiley & Sons, Incorporated, John, 2015.
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Soprano, Aldo. Liquidity Management: A Funding Risk Handbook. Wiley & Sons, Incorporated, John, 2015.
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Soprano, Aldo. Liquidity management: A funding risk handbook. 2015.
Find full textBook chapters on the topic "Liquidity funding risk"
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Banks, Erik. "Funding Liquidity Risk." In Liquidity Risk, 63–77. London: Palgrave Macmillan UK, 2005. http://dx.doi.org/10.1057/9780230508118_4.
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Banks, Erik. "Funding Liquidity Risk." In Liquidity Risk, 77–92. London: Palgrave Macmillan UK, 2014. http://dx.doi.org/10.1057/9781137374400_4.
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Lai, Chi, and Richard Tuosto. "Contingency Funding Planning." In Liquidity Risk Management, 121–40. Hoboken, NJ, USA: John Wiley & Sons, Inc, 2016. http://dx.doi.org/10.1002/9781118898130.ch7.
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Johnston, Alejandro. "Liquidity and Funding Disclosures." In Liquidity Risk Management, 263–76. Hoboken, NJ, USA: John Wiley & Sons, Inc, 2016. http://dx.doi.org/10.1002/9781118898130.ch14.
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Neu, Peter, Armin Leistenschneider, Bernhard Wondrak, and Martin Knippschild. "Market Developments in Banks' Funding Markets." In Liquidity Risk Measurement and Management, 146–69. 2 Clementi Loop, #02-01, Singapore 129809: John Wiley & Sons (Asia) Pte Ltd, 2012. http://dx.doi.org/10.1002/9781118390399.ch7.
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Fiedler, Robert. "A Concept for Cash Flow and Funding Liquidity Risk." In Liquidity Risk Measurement and Management, 171–203. 2 Clementi Loop, #02-01, Singapore 129809: John Wiley & Sons (Asia) Pte Ltd, 2012. http://dx.doi.org/10.1002/9781118390399.ch8.
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Mason, Bruce W. "Managing a Funding Crisis: Citizens First Bancorp, a Case Study 1989-1994." In Liquidity Risk Measurement and Management, 268–92. 2 Clementi Loop, #02-01, Singapore 129809: John Wiley & Sons (Asia) Pte Ltd, 2012. http://dx.doi.org/10.1002/9781118390399.ch12.
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Shin, Hyun Song. "Lending Booms." In Risk and Liquidity, 116–31. Oxford University Press, 2019. http://dx.doi.org/10.1093/oso/9780198847069.003.0007.
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A system of interlinked balance sheets of intermediaries that follow the Value-at-risk rule has the feature that an increase in house prices transmits valuation changes through the value of debt instruments. The analysis uses the Vasicek credit risk model for the diversification of individual credit risks in the loan portfolio. Leverage and wholesale funding is key to understanding lending booms.
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Shin, Hyun Song. "Case of Northern Rock." In Risk and Liquidity, 132–51. Oxford University Press, 2019. http://dx.doi.org/10.1093/oso/9780198847069.003.0008.
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The UK bank Northern Rock suffered a bank run in 2007. Withdrawal of retail deposits was covered extensively in the media, but Northern Rock’s failure was due to the silent run on wholesale funding in the summer of 2007 that preceded the retail depositor run. The securitisation vehicles of Northern Rock left it particularly vulnerable to the deleveraging by wholesale creditors in 2007, and poses many pertinent questions for the management of financial risks in an era when banking and capital markets are intertwined.
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"Liquidity Buffer and Term Structure of Funding." In Measuring and Managing Liquidity Risk, 143–98. Chichester, UK: John Wiley & Sons Ltd, 2013. http://dx.doi.org/10.1002/9781118818466.ch7.
Full textConference papers on the topic "Liquidity funding risk"
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Šeligová, Markéta. "The Impact of Funding Sources on Corporate Liquidity in Energy Sector in the Czech Republic." In Contemporary Issues in Business, Management and Education. Vilnius Gediminas Technical University, 2017. http://dx.doi.org/10.3846/cbme.2017.116.
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The aim of this paper is to determine the impact of funding sources on liquidity of companies in energy sector in the Czech Republic. With the purpose to fulfill the aim, we examine existence and character of relationship between selected financial factors (debt equity ratio, share of capital for consideration to total assets, return on equity, share of fixed assets to total assets, share of earnings before interest and taxes to total assets, equity ratio) and liquidity of the companies in energy sector in the Czech Republic. The existence of relationship between financial factors and liquidity of companies is tested by correlation analysis and generalized method of moments called GMM method. It is expected a positive relationship between liquidity and funding sources in energy sectors in the Czech Republic. Companies with high liquidity are more credible and less risky clients for creditors and can obtain the necessary financial support under more favorable and cheaper terms.
Reports on the topic "Liquidity funding risk"
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Financial Stability Report - September 2015. Banco de la República, August 2021. http://dx.doi.org/10.32468/rept-estab-fin.sem2.eng-2015.
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From this edition, the Financial Stability Report will have fewer pages with some changes in its structure. The purpose of this change is to present the most relevant facts of the financial system and their implications on the financial stability. This allows displaying the analysis more concisely and clearly, as it will focus on describing the evolution of the variables that have the greatest impact on the performance of the financial system, for estimating then the effect of a possible materialization of these risks on the financial health of the institutions. The changing dynamics of the risks faced by the financial system implies that the content of the Report adopts this new structure; therefore, some analyses and series that were regularly included will not necessarily be in each issue. However, the statistical annex that accompanies the publication of the Report will continue to present the series that were traditionally included, regardless of whether or not they are part of the content of the Report. In this way we expect to contribute in a more comprehensive way to the study and analysis of the stability of the Colombian financial system. Executive Summary During the first half of 2015, the main advanced economies showed a slow recovery on their growth, while emerging economies continued with their slowdown trend. Domestic demand in the United States allowed for stabilization on its average growth for the first half of the year, while other developed economies such as the United Kingdom, the euro zone, and Japan showed a more gradual recovery. On the other hand, the Chinese economy exhibited the lowest growth rate in five years, which has resulted in lower global dynamism. This has led to a fall in prices of the main export goods of some Latin American economies, especially oil, whose price has also responded to a larger global supply. The decrease in the terms of trade of the Latin American economies has had an impact on national income, domestic demand, and growth. This scenario has been reflected in increases in sovereign risk spreads, devaluations of stock indices, and depreciation of the exchange rates of most countries in the region. For Colombia, the fall in oil prices has also led to a decline in the terms of trade, resulting in pressure on the dynamics of national income. Additionally, the lower demand for exports helped to widen the current account deficit. This affected the prospects and economic growth of the country during the first half of 2015. This economic context could have an impact on the payment capacity of debtors and on the valuation of investments, affecting the soundness of the financial system. However, the results of the analysis featured in this edition of the Report show that, facing an adverse scenario, the vulnerability of the financial system in terms of solvency and liquidity is low. The analysis of the current situation of credit institutions (CI) shows that growth of the gross loan portfolio remained relatively stable, as well as the loan portfolio quality indicators, except for microcredit, which showed a decrease in these indicators. Regarding liabilities, traditional sources of funding have lost market share versus non-traditional ones (bonds, money market operations and in the interbank market), but still represent more than 70%. Moreover, the solvency indicator remained relatively stable. As for non-banking financial institutions (NBFI), the slowdown observed during the first six months of 2015 in the real annual growth of the assets total, both in the proprietary and third party position, stands out. The analysis of the main debtors of the financial system shows that indebtedness of the private corporate sector has increased in the last year, mostly driven by an increase in the debt balance with domestic and foreign financial institutions. However, the increase in this latter source of funding has been influenced by the depreciation of the Colombian peso vis-à-vis the US dollar since mid-2014. The financial indicators reflected a favorable behavior with respect to the historical average, except for the profitability indicators; although they were below the average, they have shown improvement in the last year. By economic sector, it is noted that the firms focused on farming, mining and transportation activities recorded the highest levels of risk perception by credit institutions, and the largest increases in default levels with respect to those observed in December 2014. Meanwhile, households have shown an increase in the financial burden, mainly due to growth in the consumer loan portfolio, in which the modalities of credit card, payroll deductible loan, revolving and vehicle loan are those that have reported greater increases in risk indicators. On the side of investments that could be affected by the devaluation in the portfolio of credit institutions and non-banking financial institutions (NBFI), the largest share of public debt securities, variable-yield securities and domestic private debt securities is highlighted. The value of these portfolios fell between February and August 2015, driven by the devaluation in the market of these investments throughout the year. Furthermore, the analysis of the liquidity risk indicator (LRI) shows that all intermediaries showed adequate levels and exhibit a stable behavior. Likewise, the fragility analysis of the financial system associated with the increase in the use of non-traditional funding sources does not evidence a greater exposure to liquidity risk. Stress tests assess the impact of the possible joint materialization of credit and market risks, and reveal that neither the aggregate solvency indicator, nor the liquidity risk indicator (LRI) of the system would be below the established legal limits. The entities that result more individually affected have a low share in the total assets of the credit institutions; therefore, a risk to the financial system as a whole is not observed. José Darío Uribe Governor