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- Probability of default (4)
- Capital adequacy (2)
- Credit models (2)
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- Multivariate GARCH-M models (2)
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Articles 1 - 19 of 19
Full-Text Articles in Business
Peas In A Pod: Canadian And Australian Banks Before And During A Global Financial Crisis, David Allen, Ray Boffey, Robert Powell
Peas In A Pod: Canadian And Australian Banks Before And During A Global Financial Crisis, David Allen, Ray Boffey, Robert Powell
Research outputs 2011
In the aftermath of the Global Financial Crisis (GFC), the Canadian and Australian banking systems have been singled out by some commentators as having performed better than many other banking systems, particularly those in Europe, America and the United Kingdom. Banks in both Canada and Australia, for instance, have continued to report enviable earnings, sound capital levels, and high credit ratings both before and during the GFC. The G-20 and the European Union have tried to identify the features of the Canadian and Australian financial systems which have underpinned this success in order to use them in shaping a revised …
Modeling Exchange Rate Exposure In The Japanese Industrial Sectors, P. Jayasinghe, A Tsui, Zhaoyong Zhang
Modeling Exchange Rate Exposure In The Japanese Industrial Sectors, P. Jayasinghe, A Tsui, Zhaoyong Zhang
Research outputs 2011
In recent years the volatility of exchange rate exposure and its associated risk have become a hot issue in international financial management. It is often assumed that a firm’s future operating cash flows is proxied by its market value, and the exposure coe fficient would be able to ef ficiently measure the impact of exchange rate changes on a firm’s return and its se nsitivity to the changes. Recen tly, some studies begin to investigate whether exchange rate exposure is asymmetric between currency appreciations and depreciations. By far most existing studies on exchange rate exposure assume that the variances of …
Innovative Transition Matrix Techniques For Measuring Extreme Risk: An Australian And U.S. Comparison, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Innovative Transition Matrix Techniques For Measuring Extreme Risk: An Australian And U.S. Comparison, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Research outputs 2011
Comparing Australia and the U.S. both prior to and during the Global Financial Crisis (GFC), using a dataset which includes more than six hundred companies, this paper modifies traditional transition matrix credit risk modelling to address two important issues. Firstly, extreme credit risk can have a devastating impact on financial institutions, economies and markets as highlighted by the GFC. It is therefore essential that extreme credit risk is accurately measured and understood. Transition matrix methodology, which measur es the probability of a borrower transitioning from one credit rating to another, is traditionally used to m easure Value at Risk (VaR), …
East Asian Financial Crisis Revisited: What Does A Copula Tell?, Pei Fei, Albert Tsui, Zhaoyong Zhang
East Asian Financial Crisis Revisited: What Does A Copula Tell?, Pei Fei, Albert Tsui, Zhaoyong Zhang
Research outputs 2011
We construct a regime-switching model of copulas to capture observed asymmetric dependence in daily changes of exchange rates in five selected East Asian economies during the 1997 financial crisis era. In particular, we investigate the effects of the financial crisis on asymmetric dependence in exchange rates returns and assess the asymmetric relationships between five currencies, including the Singapore Dollar, Japanese Yen, South Korea Won, Thailand Baht and Indonesia Rupiah. Various time-varying copula models will also be applied to examine the possible structural breaks. The results confirm significant changes at the dependence level, tail behaviour and asymmetry structures between returns of …
Modeling Information Linkages In The Stock And Options Markets, K Ho, L Zheng, Zhaoyong Zhang
Modeling Information Linkages In The Stock And Options Markets, K Ho, L Zheng, Zhaoyong Zhang
Research outputs 2011
When markets are assumed to be complete, option trading should not contain new information for market participants, as options derive their prices from the underlying stocks. However, if markets are incomplete, then this unidirectional relationship may not be true, because informed traders may prefer to trade options instead of the underlying stocks for several reasons: one, option trading involves lower transaction costs and higher financial leverage; and two, investors who have private information about stock price volatility can only make their bet on volatility in the option market. Compared with the research on the relationship between options trading activity and …
Credit Risk Measurement Methodologies, David Allen, Robert Powell
Credit Risk Measurement Methodologies, David Allen, Robert Powell
Research outputs 2011
The significant problems experienced by banks during the Global Financial Crisis have highlighted the critical importance of measuring and providing for credit risk. This paper will examine four popular methods used in the measurement of credit risk and provide an analysis of the relative shortcomings and advantages of each method. The study includes external ratings approaches, financial statement analysis models, the Merton / KMV structural model, and the transition based models of CreditMetrics and CreditPortfolioView. Each model assesses different cr iteria, and an understanding of the merits and disadvantages of the various models can assist banks and other credit modellers …
Measuring Real Capital Adequacy In Extreme Economic Conditions: An Examination Of Swiss Banking Sector, David E. Allen, Robert Powell
Measuring Real Capital Adequacy In Extreme Economic Conditions: An Examination Of Swiss Banking Sector, David E. Allen, Robert Powell
Research outputs 2011
The global financial crisis (GFC) has placed the creditworthiness of banks under intense scrutiny. In particular, capital adequacy has been called into question. Current capital requirements make no allowance for capital erosion caused by movements in the market value of assets. This paper examines default probabilities of Swiss banks under extreme conditions using structural modeling techniques. Conditional Value at Risk (CVaR) and Conditional Probability of Default (CPD) techniques are used to measure capital erosion. Significant increase in Probability of Default (PD) is found during the GFC period. The market asset value based approach indicates a much higher PD than external …
Modeling The Conditional Heteroscedasticity And Leverage Effect In The Chinese Stock Markets, Zhihui Yin, Albert Tsui, Zhaoyong Zhang
Modeling The Conditional Heteroscedasticity And Leverage Effect In The Chinese Stock Markets, Zhihui Yin, Albert Tsui, Zhaoyong Zhang
Research outputs 2011
The Chinese stock market has experienced an astonishing growth and unprecedented development since its inception in the early 1990s, emerged to be the world's second-largest by market value by the end of 2009. The Chinese stock market is also one of the most volatile markets, which has been called by many observers a “casino”. In the recent years there are several far-reaching events that have reshaped the Chinese stock markets. The most notable events include the “dot-com bubble” in 2000, China’s non-tradable shares reform in 2005 and the global financial crisis in 2008. It is noted that the “dot-com bubble” …
Modeling Time-Varying Currency Betas: New Evidence From The Selected Markets, P. Jayasinghe, A. Tsui, Zhaoyong Zhang
Modeling Time-Varying Currency Betas: New Evidence From The Selected Markets, P. Jayasinghe, A. Tsui, Zhaoyong Zhang
Research outputs 2011
In the past decade, studies of exchange rate exposure have mainly focused on three approaches. The first approach uses conventional methods such as sub-sampling, dummy variables, and overlapping moving window regression to capture exchange rate exposure. The second approach uses pre-specified determinants of exposure coefficients to analyze the time-variation of exchange rate exposure. For example, Allayannis (1997) suggests that currency beta is determined by export and import shares, and finds support for time-variation of exposure in some 4-digit level SIC industries. The third approach employs time-varying second moments to derive time-varying exchange rate exposure (see, for instance, Hunter, 2005; Lim, …
Modeling The Conditional Volatility Asymmetry Of Business Cycles In Four Oecd Countries: A Multivariate Garch Approach, K Ho, A Tsui, Zhaoyong Zhang
Modeling The Conditional Volatility Asymmetry Of Business Cycles In Four Oecd Countries: A Multivariate Garch Approach, K Ho, A Tsui, Zhaoyong Zhang
Research outputs 2011
There are many studies on the business cycle indicators in the past decades, but mostly focusing on the asymmetric and non-linear features of business cycles incorporated into the conditional mean equation rather than the conditional variance formulation. Recently, the hypothesis of volatility asymmetry in business cycle indicators has been re-examined by, for instance, Ho and Tsui (2003 and 2004) using univariate asymmetric power ARCH (APARCH) and EGARCH models. However, the main drawback of univariate GARCH analysis is that it fails to capture the co-movement of macroeconomic variables. These co-movement relationships are important issues emphasised by the business cycle researchers, yet …
A Participatory Teaching Strategy Developing A Timeline Of The Global Financial Crisis, Margaret J. Giles
A Participatory Teaching Strategy Developing A Timeline Of The Global Financial Crisis, Margaret J. Giles
Research outputs 2011
The rapid pace of change of ideas and events in economics places pressure on teachers of university economics to stay abreast of developments in their field and to reflect these developments appropriately in their classes. The Global Financial Crisis (GFC) was an excellent example of this phenomenon with a great deal of material written on this subject over a relatively short space of time. Under certain circumstances, one way of coping with such developments may be for teachers and students to acquire emerging knowledge and information jointly rather than sequentially. This paper describes a teaching strategy where students constructed a …
Japanese Banks: Tail Risk And Capital Buffers, David E. Allen, Akhmad R. Kramadibrata, Robert Powell, Abhay Singh
Japanese Banks: Tail Risk And Capital Buffers, David E. Allen, Akhmad R. Kramadibrata, Robert Powell, Abhay Singh
Research outputs 2011
This paper applies quantile regression to a structural credit model to investigate the impact of extreme bank asset value fluctuations on capital adequacy and default probabilities (PD) of Japanese Banks. Quantile regression allows modelling of the extreme quantiles of a distribution which allows measurement of capital and PDs at the most extreme points of an economic downturn, when banks are most likely to fail. Outcomes are compared to traditional structural measures. We find highly significant variances in capital adequacy and default probabilities between quantiles, and show how these variances can assist banks and regulators in calculating capital buffers to sustain …
Common Currency In East Asia: An Analysis Of Currency Convergence, Lee K. Lim
Common Currency In East Asia: An Analysis Of Currency Convergence, Lee K. Lim
Research outputs 2011
The recent global financial crisis of 2007-2009 and fears of a sovereign debt crisis in some European countries have fuelled the debates among economic analysts and policy makers on the future directions of monetary and exchange rate arrangements in the East Asian region. This paper applies both the cluster analysis and time series tests to determine whether increased trade and financial integration has led to currency convergence in the region over the period January 1990 to June 2010. The countries included in this study are the high-performing East Asian economies, namely China, Hong Kong, Japan, South Korea, Taiwan and the …
Evaluating Economic Relationships Of Stapled And Traditional Australian Reits, Jaime Yong, David Allen, Lee Lim
Evaluating Economic Relationships Of Stapled And Traditional Australian Reits, Jaime Yong, David Allen, Lee Lim
Research outputs 2011
The number of Australian Real Estate Investment Trusts (AREITs) trading as stapled securities has grown significantly in the past ten years. Though this type of trust structure improves the income growth to investors, stapled AREITs are riskier relative to traditional AREITs that act primarily as holding companies of property assets. Academic literature on REIT characteristics has found that these assets have become less integrated with bonds and more with stocks. An increasingly mature AREIT market implies that prices of these assets have become more integrated with values of the underlying direct property investments. This study employs quarterly prices over 30 …
Modelling Exchange Rate Pass-Through In Australia, China And India, Shrabani Saha, Zhaoyong Zhang
Modelling Exchange Rate Pass-Through In Australia, China And India, Shrabani Saha, Zhaoyong Zhang
Research outputs 2011
Exchange rate pass-through (ERPT) has attracted a ttention of many researchers in the last three decades due to the adoption of flexible exchange rate system by many countries. The objectives of this study are to make a comparative study by exploring the literature relating pass-through for import prices and domestic prices in Australia, China and India. In particular, we test whether the exchange rate pass-through to import prices is complete, estimate the pass-through to CPI to investigate whether there is any association between the pass-through and the average inflation rate across these countries. Using a structural VAR model we test …
Modeling The Fractional Integration In Volatility Between The Greater China Financial Markets, K. Ho, Zhaoyong Zhang
Modeling The Fractional Integration In Volatility Between The Greater China Financial Markets, K. Ho, Zhaoyong Zhang
Research outputs 2011
The dynamics of the interrelationships among the financial markets in the Greater China area including Mainland China, Taiwan, and Hong Kong, is a noteworthy issue of economic research. This is not only because the financial markets in this region have grown rapidly over the past decade, but also because of the arguably asymmetric integration of the emerging Chinese economy with advanced countries in the real side of the economy and tight control over financial market. Since its establishment in the early 1990s, the Mainland Chinese stock market has expanded rapidly in terms of capitalization, turnover, and the new listings. Even …
Alexander Hamilton And Asian Capitalism, Ian Austin
Alexander Hamilton And Asian Capitalism, Ian Austin
Research outputs 2011
Alexander Hamilton (1755-1804), extensive essayist (including The Federalist), long-serving aide de camp to George Washington (1732-1799), the first Secretary to the Treasury (1789-1795), and author of a series of Reports to Congress, takes his rightful place as one of theUnited States ofAmerica’s founding fathers. Like all members of Washington administrations (1789-1797), Hamilton on taking office was acutely aware of the highly precarious nature of the new nation’s future.What was to replace British rule was far fromcertain, and at the time the construction of a functioning republic beyond a small geographical area was considered by political orthodoxy to be dubious. In …
Assessing The Dynamic Relationship Between Small And Large Cap Stock Prices, K. Ho, B. Ernst, Zhaoyong Zhang
Assessing The Dynamic Relationship Between Small And Large Cap Stock Prices, K. Ho, B. Ernst, Zhaoyong Zhang
Research outputs 2011
The historical long-run return on small capitalization stocks has unquestionably outperformed large capitalization stocks since 1926. The phenomenon of small capitalization stocks having higher risk- adjusted returns compared with large capitalization stocks is an equity market anomaly first discovered in 1981. Since then, many academics and investors have strongly argued that “size is dead”. This paper argues that far from being dead, the phenomenon of size effect appears alive and well and it could be exploited effectively over long-term investment horizons. To analyze this phenomenon, we focus specifically on the dynamics of small cap and large cap prices. We test …
Are Credit Ratings A Good Measure Of Capital Adequacy?, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Are Credit Ratings A Good Measure Of Capital Adequacy?, David Allen, Akhmad Kramadibrata, Robert Powell, Abhay Singh
Research outputs 2011
Focus on capital adequacy intensified since the onset of the Global Financ ial Crisis (GFC), with many US and other global banks experiencing capital shortages over this time. The Basel standardised approach uses credit ratings as a determinant for corporate capital adequacy requirements. A problem with credit ratings is that they were designed to be a measure of relative, as opposed to absolute credit risk, and do not ratchet up or down with changes in economic circumstances. This paper examines how credit risk as indicated by credit ratings (and thei r associated capital requirement) changed pre and post Global Financial …