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Financial Industry (financial + industry)
Selected AbstractsStress Testing of Financial Industries: A Simple New Approach to Joint Stress Testing of Korean Banking, Securities, and Non-Life Insurance Industries,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2009Kook-Hyun Chang Abstract This paper proposes a simple joint stress testing model useful in studying the effects of specific stress scenarios on a financial sector. In doing so, we adopt the principal component analysis (PCA) as a main device to interpret various financial information contained in figures and numbers on a financial company. We repeat the principal component analysis across different levels from individual company to a financial industry, and eventually to a financial sector as a whole to derive a financial sector risk index. We then link the sector risk index with stress macro variables, which constitute a much simpler task than devising individual models for each financial components. Once a relationship is established, a joint stress test is conducted by repeating PCA conversely. As a sample of stress scenario in the paper, we use the case of the 2003 credit card distress. We find that securities industry is more sensitive to market stresses than two other industries-bank and insurance-and that financial institutions in such a stress-sensitive industry are, consequently, more affected by the stresses than those in other industries. Despite the simplicity of the proposed model, this model is expected to provide substantial information, particularly for financial supervisors without having to build a complicated joint stress testing model. [source] BUSINESS METHOD PATENTS AND U.S. FINANCIAL SERVICESCONTEMPORARY ECONOMIC POLICY, Issue 3 2010ROBERT M. HUNT A decade after the State Street decision, more than 1,000 business method patents are granted each year. Yet, only 1 in 10 is obtained by a financial institution. Most business method patents are also software patents. Have these patents increased innovation in financial services? To address this question, we construct new indicators of research and development intensity based on the occupational composition of financial industries. The financial sector appears more research intensive than official statistics would suggest but less than the private economy taken as a whole. There is considerable variation across industries but little apparent trend. There does not appear to be an obvious effect from business method patents on the sector's research intensity. Looking ahead, three factors suggest that the patent system may affect financial services as it has electronics: (1) the sector's heavy reliance on information technology, (2) the importance of standard setting, and (3) the strong network effects exhibited in many areas of finance. Even today litigation is not uncommon; we sketch a number of significant examples affecting financial exchanges and consumer payments. The legal environment is changing quickly. We review a number of important federal court decisions that will affect how business method patents are obtained and enforced. We also review a number of proposals under consideration in the U.S. Congress. (JEL O31, O34, G20) [source] The Effect of VaR Based Risk Management on Asset Prices and the Volatility SmileEUROPEAN FINANCIAL MANAGEMENT, Issue 2 2002Arjan Berkelaar Value-at-risk (VaR) has become the standard criterion for assessing risk in the financial industry. Given the widespread usage of VaR, it becomes increasingly important to study the effects of VaR based risk management on the prices of stocks and options. We solve a continuous-time asset pricing model, based on Lucas (1978) and Basak and Shapiro (2001), to investigate these effects. We find that the presence of risk managers tends to reduce market volatility, as intended. However, in some cases VaR risk management undesirably raises the probability of extreme losses. Finally, we demonstrate that option prices in an economy with VaR risk managers display a volatility smile. [source] The impact of the Asian financial crisis on bank efficiency: The 1997 experience of Malaysia and ThailandJOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 7 2010Fadzlan Sufian Abstract In the mid-1990s, the East Asian countries experienced severe financial crisis that were followed by deep economic downturns. A variety of methodologies have been used to understand the nature of the Asian financial crisis. However, the impact of the 1997 Asian financial crisis on the efficiency of the financial industry has yet to be studied. By employing the Data Envelopment Analysis (DEA) approach the present study attempts to examine for the first time the impact of the 1997 Asian financial crisis on the efficiency of the Malaysian and Thailand banking sectors, two of the East Asian countries that were severely affected by the crisis. The study focuses on three major approaches vis., intermediation, value added and operating approaches. The results clearly bring forth the high degree of inefficiency in the Malaysian and Thailand banking sectors, particularly a year after the crisis. We find that the Malaysian banking sector has exhibited a higher TE levels during the post crisis period under the intermediation and value added approaches, while TE seems to be lower under the operating approach. The empirical findings suggest that the Thailand banking sector has exhibited a lower TE level during the post crisis period under all approaches. Copyright © 2009 John Wiley & Sons, Ltd. [source] User preferences in the classification of electronic bookmarks: Implications for a shared systemJOURNAL OF THE AMERICAN SOCIETY FOR INFORMATION SCIENCE AND TECHNOLOGY, Issue 7 2001Lisa Gottlieb Using the financial industry as a context, the following study seeks to address the issue of the classification of electronic bookmarks in a multi-user system by investigating what factors influence how individuals develop categories for bookmarks and how they choose to classify bookmarks within those organizational categories. An experiment was conducted in which a sample of 15 participants was asked to bookmark and to categorize 60 web sites within Internet Browser folders of their own creation. Based on the data collected during this first component of the study, individual, customized questionnaires were composed for each participant. Whereas some of the questions within these surveys focused on particular classificatory decisions regarding specific bookmarks, others looked at how the participant defined, utilized, and structured the category folders that comprised his or her classification system. The results presented in this paper focus on issues investigated in Kwasnik's (Journal of Documentation, 1991, 47, 389,398) study of the factors that inform how individuals organize their personal, paper-based documents in office environments. Whereas classificatory attributes culled from questionnaire responses nominally resembled those identified by Kwasnik, it was found that a number of these factors assumed distinctive definitions in the electronic environment. The present study suggests that the application of individual instances of classificatory attributes and the distinction between Content and Context Attributes emphasized by Kwasnik play a minimal role in the development of a multi-user classification system for bookmarks. [source] Kernel estimation of quantile sensitivitiesNAVAL RESEARCH LOGISTICS: AN INTERNATIONAL JOURNAL, Issue 6 2009Guangwu Liu Abstract Quantiles, also known as value-at-risks in the financial industry, are important measures of random performances. Quantile sensitivities provide information on how changes in input parameters affect output quantiles. They are very useful in risk management. In this article, we study the estimation of quantile sensitivities using stochastic simulation. We propose a kernel estimator and prove that it is consistent and asymptotically normally distributed for outputs from both terminating and steady-state simulations. The theoretical analysis and numerical experiments both show that the kernel estimator is more efficient than the batching estimator of Hong 9. © 2009 Wiley Periodicals, Inc. Naval Research Logistics 2009 [source] First passage time for multivariate jump-diffusion processes in finance and other areas of applicationsAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 5 2009Di Zhang Abstract The first passage time (FPT) problem is an important problem with a wide range of applications in science, engineering, economics, and industry. Mathematically, such a problem can be reduced to estimating the probability of a stochastic process first to reach a boundary level. In most important applications in the financial industry, the FPT problem does not have an analytical solution and the development of efficient numerical methods becomes the only practical avenue for its solution. Most of our examples in this contribution are centered around the evaluation of default correlations in credit risk analysis, where we are concerned with the joint defaults of several correlated firms, the task that is reducible to a FPT problem. This task represents a great challenge for jump-diffusion processes (JDP). In this contribution, we develop further our previous fast Monte Carlo method in the case of multivariate (and correlated) JDP. This generalization allows us, among other things, to evaluate the default events of several correlated assets based on a set of empirical data. The developed technique is an efficient tool for a number of financial, economic, and business applications, such as credit analysis, barrier option pricing, macroeconomic dynamics, and the evaluation of risk, as well as for a number of other areas of applications in science and engineering, where the FPT problem arises. Copyright © 2008 John Wiley & Sons, Ltd. [source] A New Financial Infrastructure to Recover the Loss of Trust?ASIAN-PACIFIC ECONOMIC LITERATURE, Issue 1 2009Jocelyn Pixley This paper examines four sets of proposals for a new financial infrastructure in the wake of the global financial crisis. It is argued that two concerns should inform us about the way forward. First, uncertainty cannot be ignored because money relies on trust. Second, we live in an increasingly impersonal world with many diverse peoples now involved in the global financial industry. Each proposal is assessed in terms of sociological worries about the decline of trust. [source] Stress Testing of Financial Industries: A Simple New Approach to Joint Stress Testing of Korean Banking, Securities, and Non-Life Insurance Industries,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 4 2009Kook-Hyun Chang Abstract This paper proposes a simple joint stress testing model useful in studying the effects of specific stress scenarios on a financial sector. In doing so, we adopt the principal component analysis (PCA) as a main device to interpret various financial information contained in figures and numbers on a financial company. We repeat the principal component analysis across different levels from individual company to a financial industry, and eventually to a financial sector as a whole to derive a financial sector risk index. We then link the sector risk index with stress macro variables, which constitute a much simpler task than devising individual models for each financial components. Once a relationship is established, a joint stress test is conducted by repeating PCA conversely. As a sample of stress scenario in the paper, we use the case of the 2003 credit card distress. We find that securities industry is more sensitive to market stresses than two other industries-bank and insurance-and that financial institutions in such a stress-sensitive industry are, consequently, more affected by the stresses than those in other industries. Despite the simplicity of the proposed model, this model is expected to provide substantial information, particularly for financial supervisors without having to build a complicated joint stress testing model. [source] Does the Lender Matter?CANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 4 2002Home Office Location, Lender Type, Real Estate Development Lending Inter-regional expansion and merger and acquisition activity triggered by regulatory reforms are changing the structure of North America's financial industry. Increases in concentration and the belief that large and small financial institutions specialize in distinct segments of the lending market have raised concerns among some that these industry changes will have real effects on the availability and access to credit for distinct classes of borrowers, especially smaller firms. This paper examines this issue by looking at differences across lenders in the financing of residential construction by lender type and home office location (local versus out-of-province). The analysis has two components. The first is a descriptive data analysis for evidence that smaller, local lenders provide capital to more marginal and infra-marginal borrowers. The second is a test of whether lenders active in multiple jurisdictions allocate loan capital for real estate efficiently. To evaluate these issues, the paper uses data on over 1,300 senior and junior construction loans in the Vancouver, BC, metropolitan area. We find that local lenders do seem to behave differently, charging lower spreads and extending credit to more marginal or less well capitalized developers. However, contrary to the claims of many Vancouver developers, lenders in Central Canada did not limit credit to British Columbia when their home real estate markets turned down in the late 1980s and early 1990s. Instead, the lending volume and market share in the Vancouver market of lenders based outside of BC rose when the relative condition of their home real estate markets worsened. Résumé La fusion et l'expansion inter-régionales, l'acquisition des activités déclenchée par les reformes régulatrices modifient la structure des industries financières nord-américaines. Les accroissements de la concentration et la croyance en la spécialisation des petites et des grandes institutions financières dans différents secteurs du marché de prêt ont amené les uns à s'inquiéter du fait que certains de ces changements industriels peuvent avoir des effets certains sur la disponibilité et l'accès au crédit à des classes distinctes d'emprunteurs et en particulier aux petites firmes. Le présent article examine cette question en analysant les différences entre les prêteurs dans le financement des constructions résidentielles suivant le type de prêteur et le lieu d'implantation de son établissement principal (dans la province par opposition à hors de la province). L'analyse a deux composantes: la première est l'analyse descriptive des données dans le but de montrer que les petits prêteurs locaux fournissent des capitaux à plus d'emprunteurs marginaux et infra-marginaux. La seconde composante est un test qui vise à savoir si les prêteurs actifs dans plusieurs juridictions allouent efficacement des capitaux d'emprunts aux compagnies immobilières. Pour évaluer ces questions, l'article utilise des données de plus de 1300 prêts de constructions primaires et secondaires dans la zone métropolitaine de Vancouver, en Colombie Brittanique. Notre travail permet de constater que les prêteurs locaux semblent se comporter différemment, demandant des marges plus basses et accordant des crédits à des promoteurs immobiliers plus marginaux ou nettement moins capitalisés. Cependant, contrairement aux déclarations de plusieurs promoteurs immobiliers de Vancouver, les prêteurs du Canada Centre ne s'étaient pas limités à la Colombie Britannique dans l'octroi des crédits quand leurs marchés des propriétés immobilières avaient fléchi à la fin des années 1980 au début des années 1990. Bien au contraire, le volume de prêt et la part de marché dans le marché de Vancouver des prêteurs installés hors de la Colombie Britannique s'est accru quand la condition relative de leurs marchés immobiliers a empiré. [source] | |||||||||||||