loan, interest rate and how to return





The distribution of loan portfolio value
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The amount of capital necessary to support a portfolio of debt securities depends on the probability distribution of the portfolio loss. Consider a portfolio of loans, each of which is subject to default resulting in a loss to the lender. Suppose the portfolio is financed partly by This article tests an income-smoothing hypothesis for a sample of 106 large bank holding companies for the period 1976 to 1984. Our focus is on the behavior of the provision for loan losses as a function of bank income and alternative measures of business conditions likely Net loan chargeoffs and nonperforming loans reflect realized credit risks for banks. These risks arise from either external factors such as depressed economic conditions (eg, the energy and farm belts of the United States in the 1980s) or internal factors such as poor Summary. The Basel Committee on Banking Supervision is proposing to introduce, in 2006, new risk-based requirements for internationally active (and other significant) banks. These will replace the relatively risk-invariant requirements in the current Accord. The new

Bank loan loss given default
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This paper, an update on Moody's November 1996 study, examines borrowers of bank loans, rather than the banks that made defaulted loans. It looks at secondary market price quotes of bank loans one month after the time of default, thereby allowing markets to We examine alternative underlying motives of bank managers in using loan loss provisions (LLP) to smooth reported income. Based on the analytical results of Fudenberg and Tirole (1995), we predict that for banks with good (poor) current performance and expected poor Theories of discrimination in credit markets suggest that under certain circumstances systematic lender bias may result in creditors holding minority applicants or applicants from minority neighborhoods to higher standards of creditworthiness than other borrowers. This

The Benefits and Costs of Loan Guarantee Programs
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Background Loan guarantee schemes have a long history. Most high-income countries have used these programs to stimulate lending for a variety of purposes, but most often to help operators of small businesses (Levitsky and Prasad). Governments and donors have also

Loan phonology is not all perception: Evidence from Japanese loan doublets
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When loanwords from a source language (Ls) enter a borrowing language (Lb), they may be altered to conform to Lb phonology. This phenomenon, known as loanword adaptation, has long been considered a source of evidence about the phonological grammar of Lb. Abstract In many countries, loan guarantee programs are important elements of government policy with respect to small-and medium-sized enterprises (SMEs). If loan guarantee schemes are to be effective, a majority of firms obtaining assistance through such a scheme

Life after debt: Results of the national student loan survey. Selected text from the final report
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Sandy Baum is Professor of Economics at Skidmore College. Diane Saunders is Vice President Public Affairs at Nellie Mae. fects borrower decisions. The assumption is that indebt edness may cause borrowers to drop out of college, cancel plans for graduate

Loan loss provisions in Spain. A working macroprudential tool
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Therefore, banking supervisors' experiences (and concerns) are well rooted on both theoretical and empirical grounds. The risk in bank portfolios builds up during the expansion periods. In recessions, the ex ante credit risk increase materialises ex post in credit losses. It Abstract This paper analyses Italian households' participation to the debt market, separating the probability of demanding a loan from the probability of being rationed by lenders; on the supply side of the market specific attention is paid to enforcement costs of the loan contract

Corporate bond and commercial loan portfolio analysis
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Abstract: In this paper we have presented a new approach to measure the return-risk trade- off in portfolios of risky debt instruments, whether bonds or loans. The use of complex, statistically based portfolio techniques to manage assets of financial institutions and fixed

Factors affecting on loan repayment performance of farmers in Khorasan-Razavi Province of Iran
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Abstract This study investigated the factors influencing on repayment behavior of farmers that received loan from agricultural bank by using a logit model and a cross sectional data of 175 farmers of Khorasan-Razavi province in 2008. Results showed that loan interest rate is

The effect of systematic credit risk on loan portfolio value-at-risk and loan pricing
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In what follows, we analyze the typical way in which Z-risk and credit correlation affect portfoliowide risk. To simplify the analysis, we consider a loan portfolio in which each borrower has the same exposure to Z-risk. We thus replace the borrower-specific by a single

Loan rate stickiness: theory and evidence
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ABSTRACT Financial deregulation in the 1980s saw the lifting of regulations on interest rates charged by banks. In general, lending rates now respond more quickly to changes in banks' cost of funds than they did in the regulated period. However, lending rates still do not This paper identifies the key institutional factors that influence loan loss rates in Community Development Finance Institutions in the UK. Traditional bank credit assessment puts the blame of poor loan performance largely on the borrower. This is the first study of its kind to

The international debt problem, credit rationing and loan pushing: Theory and experience
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My interest in this subject developed over several years. Discussions with Tariq Banuri, Peter Bauer, Sudipto Bhattacharya, Jim Boyce, Gerald Epstein, Carol Heim, Allen Kelley, Anne Krueger, Badal Muherji, Siddiq Osmani, Robert Pringle, Debraj Ray, Jaime Ros, and Studies of US loan and deposit markets have found that consumer interest rates respond asymmetrically to changes in market rates. If this finding is repeated across many different consumer finance product markets, then it could have important implications for the

Simple forecasts of bank loan quality in the business cycle
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Abstract Experience from models such as SEER suggests that bank financial conditions predict bank failures. However, it has been difficult to find a relationship between macroeconomic variables and bank failures. This paper shows ways in which simple time-

Entrepreneurship and credit constraints: Evidence from a French loan guarantee program
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Public schemes aiming at facilitating small and medium-sized enterprises (SMEs) and young firms' access to external finance are pervasive around the world. While these programs have been implemented for years, their evaluation has long lagged behind. This

Does bank monitoring influence loan contract terms
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Abstract We examine the impact of bank monitoring on loan contract terms using a new proxy for monitoring ability based on the labor input into monitoring. We show in out-of- sample tests that the proxy is a statistically and economically significant determinant of future

Recent trends in bank loan syndications: Evidence for 1995 to 1999
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Abstract Bank loan syndications have become an increasingly popular and important way for commercial borrowers to satisfy their financing needs. The ability to overcome problems of adverse selection and moral hazard are critical to the development of this market. Using a

Similarity in phonology: Evidence from reduplication and loan adaptation
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This dissertation takes as a starting point the hypothesis that phonological processes are shaped by pressure to maintain perceptual similarity between corresponding forms. The aim of this project is to establish what the facts of perceptual similarity are, in a particular domain, This research addresses the question of whether student loan repayment and default behaviors are more highly related to the characteristics of the college attended or to the characteristics of the individual student aid recipient. Our model development and variable

Monetary policy and subprime lending: a tall tale of low federal funds rates, hazardous loans and reduced loan spreads
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Abstract We study the impact of monetary policy on bank risk-taking and pricing. Bolivia provides us with an excellent setting for econometric identification, with the US federal funds being an appropriate measure of monetary policy between 1999 and 2003. We study

Determinants of loan repayment under the indigenous financial system in Southeast, Nigeria
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Abstract: Orlu Local Government Area of Imo State was purposively for the study. Six Communities were randomly selected from the fifteen Communities in Orlu Local Government Area. From each of the 6 communities, three indigenous financial institutions

Alternative objectives of national student loan schemes: Implications for design, evaluation and policy
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Government-sponsored student loan schemes are in place in some fifty countries. Yet an examination of the working of individual country schemes displays considerable variation from scheme to scheme, defying any attempt to identify common or even 'best'practice.

Effects of macroeconomic shocks to the quality of the aggregate loan portfolio
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Abstract The paper concerns macro-prudential analysis. It uses an unrestricted VAR model to empirically investigate transmission involving a set of macroeconomic variables describing the development of the Czech economy and the functioning of its credit channel

Bankrupt bank loan recoveries
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by Lea V. Carty, David T Hamilton, and Adam Moss study by Moody's Investors Service, of interest to anyone holding bank loans in their portfolios, documents the bankruptcy and recovery experience of 200 bank loans. It extends and updates previous Moody's research This study examines the effect of SL and credit union competition on bank behaviorin Idaho and Montana. A structure-performance OLSmodel is used to estimate bank interest rates oncertain deposits. Two key independent variables arelocal market share of credit

Loan-loss Provisions and Third-World Debt
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The development of the practice by commercial banks of" provisioning" against loans to developing countries can be understood only in the context of the evolving third-world debt problem. The seeds of the debt problem were sown following the first major hike in oil prices

Analysis of loan repayment among small scale farmers in Oyo State, Nigeria
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ABSTRACT The study analysed loan repayment among small scale farmers in Oyo State, Nigeria. It specifically identified socio-economic characteristics of the respondents and quantitatively determined some socio-economic characteristics of these farmers that

Loan demand: An empirical analysis using micro data
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The demand for business loans has been investigated thoroughly in the past (eg, Goldfeld (1969) and Wood (1975)). More recently, Hicks (1980) examined factors that inuence aggregate business loans and estimated a detailed loan demand function. However, these Unlike banking textbooks that emphasise institutional arrangements in the banking world, the primary purpose of this book is to propose a sound valuation model for banks. Surprisingly, very few publications on the subject are available. Anchored in the fields of

Testing for imperfect competition on EU deposit and loan markets with Bresnahan's market power model
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Abstract Bresnahan and Lau developed a model of profit maximising oligopoly banks in order to determine the degree of market power of the average bank. The equilibrium price equation includes a mark up, which is not used at all under perfect competition, partly used This article attempts to draw attention to some important lessons that the Pension Benefit Guaranty Corporation (PBGC) can learn from the experience of the Federal Savings and Loan Insurance Corporation (FSLIC). FSLIC was the government agency that insured

Online P2P lending nibbles at banks' loan business
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New online lending platforms match people who need a small loan with those who have extra cash to lend. Person-to-person (P2P) lending sites aim to save costs by brokering loans without a retail bank directly between individual savers and lenders. P2P loans are

Federal Lending and Loan Insurance Programs for Housing
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ouit basic series, federal credit aid to housing is limited to loans made for construction, purchase, or improvement of real estate (including insurance or guarantee, or purchase of such loans); it does not include financial assistance to state or city authorities for urban

Loan equivalents for revolving credits and advised lines
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December 2000 involving 1,021 observations of 408 facilities for 399 defaulted borrowers at Chase. The study and resulting article evaluates the bank's exposure at default, regardless of the borrower's motivation for draw-downs. Bankers can benefit from this analysis of risk

The controlling shareholder's personal stock loan and firm performance
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Abstract This paper studies companies that have a controlling shareholder. In particular, it examines the relationship between firm performance and its controlling shareholder's personal loan. We present a model to identify two effects of a personal loan that is secured In 1985, I was granted a three-month sabbatical: a reward for having survived five financially challenging and sometimes stressful years as president of the largest comprehensive college in the State University of New York system. More than a little of the stress had

The syndicated loan market: Developments in the North American context
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Abstract The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary US syndicated loan market, which is effectively a hybrid of the investment

The legitimacy of loan maturity mismatching: A risky, but not fraudulent, undertaking
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Abstract Barnett and Block (Journal of Business Ethics, 2009) attack the heart of modern banking by claiming that the practice of borrowing short and lending long is illicit. While their claim of illegitimacy concerning fractional reserve banking can be defended, their

Who takes the credit Gender, power and control over loan use in rural credit programmes in Bangladesh
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Abstract Special credit institutions in Bangladesh have dramatically increased the credit available to poor rural women since the mid-1980s. Though this is intended to contribute to women's empowerment, few evaluations of loan use investigate whether women actually

Is a student loan crisis on the horizon
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Executive Summary College tuition and student debt levels have been increasing at a fast pace for at least two decades. These well-documented trends, coupled with an economy weakened by a major recession, have raised serious questions about whether the market for There is strong evidence that the interest rates charged by banks on the flow of newly extended CommercialIndustrial (CI) loans predict future loan performance and CAMEL rating downgrades by bank supervisors. While internal risk ratings have little explanatory Abstract The loan market is a hybrid between a public and a private market, comprised of financial institutions with access to private information about borrowing firms. We test whether this is reflected in informationally efficient price formation in the loan market vis-a-

Regulatory capital ratios, loan loss provisioning and procyclicality
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Abstract Reducing lending allows banks concerned with future capital inadequacy to reduce the likelihood of a capital shortage. The capital crunch theory predicts that banks' lending is particularly sensitive to their regulatory capital ratios during recessions when regulatory Loans guaranteed by private parties other than government agencies experienced an explosive growth in the early 1980s. Althoughprivate financial guarantees are widely used, models for valuing them are not well developed. Using option-pricing theory, in a discrete-

Subprime loan quality
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Abstract This paper is an exploration of subprime mortgages over the cohorts from 2000 through 2006, especially those prior to 2004. In particular, this study contrasts sub'prime originations during the qboom yearsrof 2004'2006 with originations during an qearly

Securitization, loan sales, and the credit slowdown
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Household and business lending has slowed sharply in recent years, but the anemic growth in loans booked at depository institutions, mortgage companies, and finance companies may overstate the decline in credit originated by these institutions. In particular, increased

Student loan defaults and enrollment persistence
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Abstract In this paper the authors estimate a model of student loan defaults using a rich panel data file constructed by merging administrative data on student loans, higher education enrollment and performance, and ACT test data for a large cohort of first time, full- On May 19, 1987, Citicorp announced (after markets closed) that it would add $3 billion to its loan loss reserve in recognition of the poor quality of outstanding loans to Third World countries. Eleven other money-center banks followed this policy over the next five months.

Addressing the pro-cyclicality of capital requirements with a dynamic loan loss provision system
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Abstract The pro-cyclical effect of bank capital requirements has attracted much attention in the post-crisis discussion of how to make the financial system more stable. This paper investigates and calibrates a dynamic provision as an instrument for addressing pro-

Comperative analysis of loan recovery among nationalized, private and islamic commercial banks of Bangladesh
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Bangladesh has a unique Banking system with multiple types of Banking with Nationalized Commercial Banks (NCBs), Private Commercial Banks (PCBs), Foreign Commercial Banks (FCBs), Islamic Commercial Banks (ICBs), Specialized Development Banks and the

The US leveraged loan market: a Primer
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Abstract: This paper sets forth the origins and milestones of the quiet revolution that has been the growth of the syndicated loan market. The leveraged portion of the market, the part of the market where most innovation has occurred, receives special attention. This analysis

The subprime loan machine
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Through his private software company in Austin, Tex., Mr. Jones and his son, Michael, designed a program that used the Internet to screen borrowers with weak credit histories in seconds. The software was among the first of its kind. By early 1999, his company, Arc

The long-run performance of firms following loan announcements
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ABSTRACT Unlike equity offerings or public debt offerings, bank loan financing elicits a significantly positive announcement return. The lengthy literature on firm financing decisions relies (in part) on this finding to characterize bank loans as unique or special forms of

interest rate 2017 IEEE PAPER



Abstract/R sumThis study considers the time series behavior of the US real interest rate from 1961 to 1986. We provide a statistical characterization of the series using the methodology of Hamilton (1989), by allowing three possible regimes affecting both the mean

Interest rate rules in an estimated sticky price model
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This paper seeks to evaluate monetary policy rules that generalize the rule proposed by Taylor (1993). In particular, we consider rules in which the Fed sets the federal funds rate as a function of the history of inflation, output, and the federal funds rate itself. Even though this

Inflation, income taxes, and the rate of interest: A theoretical analysis
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Income taxes are a central feature of economic life but not of the growth models that we use to study the long-run effects of monetary and fiscal policies. The taxes in current monetary growth models are lump sum transfers that alter disposable income but do not directly affect

Methods of policy accommodation at the interest-rate lower bound
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Recent events have confronted many of the world's leading central banks with a situation that was regarded a few decades ago as merely a theoretical curiosity a situation in which they have reached a lower bound on the level to which they are able to push overnight

The effects of conventional interest rates and rate of profit on funds deposited with Islamic banking system in Malaysia
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Interest rate has long been recognized not only by classical and neo-classical economists but also by contemporary economists as one of the factors that determine the level of savings in the economy. Although there are cases of inconsistent findings, it is a generally This article estimates the interest rate and exchange rate risk betas of 59 large US commercial banks for the period of 1975 1992, as well as the bank-specific determinants of these betas. The estimation procedure uses a modified seemingly unrelated simultaneous This article develops and tests a random coefficient two-index model for commercial bank stock returns which controls for the time-varying interest rate sensitivity caused by a bank's changing maturity profile. Using a sample of 51 actively traded commercial banks, the

'Credit Rationing Behavior of Agricultural Lenders: The Iron Law of Interest Rate Restrictions
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9 Colloquium on Rural Finance September 1-3, 1981 Economic Development Institute World Bank Washington, DC 20433 USA CREDIT RATIONING BEHAVIOR OF AGRICULTURAL LENDERS: THE IRON LAW OF INTERESTRATE RESTRICTIONS By CLAUDIO

Estimating market interest rate and inflation expectations from the prices of UK government bonds
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The disruption in the foreign exchange markets during 1992 and 1993 led to the suspension of sterling's membership of the exchange rate mechanism (ERM) and to the widening of the fluctuation bands of most of the remaining currencies. The move from essentially a fixed Abstract This thesis brings together estimation methods and stochastic factor models for the term structure of interest rates within the HJM framework. It is based on the complex of consistency problems introduced by Bj rk and Christensen [7]. There exist commonly used

An empirical analysis of interest rate spread in Kenya
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RW Ngugi 2001 erepository.uonbi.ac.ke Financial intermediaries arise because of information asymmetry and transaction costs between agents. The intermediaries serve to ameliorate the problems created by information and transaction frictions. They facilitate mobilization of savings, diversification and pooling of

Convergence of discretized stochastic (interest rate) processes with stochastic drift term
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SUMMARY For applications in finance, we study the stochastic differential equation dXs=(2 Xs+ ds) ds+ g (Xs) dBs witha negative real number, ga continuous function vanishing at zero which satisfies a H lder condition and d a measurable and adapted

Liberalized portfolio capital inflows in emerging markets: Sterilization, expectations, and the incompleteness of interest rate convergence
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Abstract The paper examines interest rates in nine Latin American and East Asian countries during the period 1987-1994. The goal is to discover why interest rates have remained high, failing to converge to US levels, despite capital market liberalization and a resurgence of

Revealing the secrets of the temple: The value of publishing central bank interest rate projections
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The modern approach to monetary policy stresses the importance of guiding and influencing the public's expectations about future central bank actions. In this forward-looking view of monetary policy, the current setting of the policy interest rate, which is an overnight or very

Interest rate setting by the ECB, 1999-2006: Words and deeds
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We estimate empirical reaction functions for the European Central Bank (ECB) with ordered-probit techniques, using the ECB's Monthly Bulletin to guide the choice of variables. The results show that policy reacts to the state of the real economy, M3 growth, and exchange

Interest rate volatility, contagion and convergence: an empirical investigation of the cases of Argentina, Chile and Mexico
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Interest rates are, arguably, one of the most important macroeconomic variables. They provide a key transmission channel for the propagation of shocks throughout the economy, and play a fundamental role in asset pricing. And yet, over the years there has been This paper investigates the use of interest-rate derivatives by US commercial banks with total assets between 100millionand 1 billion. These banks are interesting, because they allow us to focus on the end-users of interest-rate derivatives rather than dealers. Over our By an ARIMA approach and verified by the Granger causality tests, the causality of daily interest rate, exchange rate and stock prices in Hong Kong were explored for the period 1986 to 1991. Depending on the subperiods being considered, sporadic unidirectional This article examines the role played by derivatives in determining the interest rate sensitivity of bank holding companies'(BHCs) common stock, controlling for the influence of on-balance sheet activities and other bank-specific characteristics. The major result of the Abstract. We introduce a general class of interest rate models in which the value of pure discount bonds can be expressed as a functional of some (low-dimensional) Markov process. At the abstract level this class includes all current models of practical importance.

Interest rate spreads, credit constraints, and investment fluctuations: an empirical investigation
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Recent time-series work in macroeconomics has emphasized the role of the interest rate spread between risky and safe debt in forecasting real GNP. Stock and Watson (1989) and Friedman and Kuttner (1989) demonstrate that this interest differential has greater predictive We take as given a filtered probability space (n, F, P, F) carrying a finite number of stochastic processes SO,",, SK. We assume that all processes are semimartingales, and with very little loss of generality the reader can assume that the S processes are defined by a system of Summary. In this article we study the effects of transaction costs on asset prices. We assume an overlapping generations economy with two riskless assets. The first asset is liquid while the second asset carries proportional transaction costs. We show that agents buy the liquid Abstract. We consider interest rate models where the forward rates are allowed to be driven by a multidimensional Wiener process as well as by a marked point process. Assuming a deterministic volatility structure, and using ideas from systems and control theory, we

Measuring and managing interest rate risk: a primer
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Losses from unexpected changes in interest rates have become an increasing problem at depository institutions over the past decade. as interest rates have become more volatile and have climbed to unprecedented levels. Such losses occur when unexpected increases * This is a revised version of a paper given at the Wingspread Conference on the Political Economy of Monetary Reform, July 1974. I have benefited from comments of and discussions with several people in addition to the participants o (the conference. In particular Abstract This paper gives an asymptotically equivalent formula for the finite-time ruin probability of a nonstandard risk model with a constant interest rate, in which both claim sizes and inter-arrival times follow a certain dependence structure. This new dependence This paper evaluates the interest rate risk of Fannie Mae and Freddie Mac (FF) and develops related public policy proposals. FF merit special attention due to (1) their potentially very large interest rate risk, and (2) their status as US government sponsored Abstract. The Market Models of the term structure of interest rates, in which forward LIBOR or forward swap rates are modelled to be lognormal under the forward probability measure of the corresponding maturity, are extended to a multicurrency setting. If lognormal dynamics

The Role of Interest Rate Policy in the Generation and Propagation of Business Cycles: What Has Changed Since the'30s
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Governments have two broad classes of macroeconomic impact. One has to do with the way government liabilities, including cash, interact with other traded assets in the financial system. The other has to do with government absorption and production of real resources

Interest rate risk and bank net interest margins
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Banks and their supervisors have spent considerable time and effort in recent years developing systems for monitoring and managing interest rate risk. 2 This special feature examines that specific component of interest rate risk arising from the possible effects of Considering the characteristics of banks that do and do not report interest rate swaps, the long-term interest rate exposure of a bank and the likelihood and extent of swap market participation are found to be positively related. Key to the finding is the inclusion of variables Studies of US loan and deposit markets have found that consumer interest rates respond asymmetrically to changes in market rates. If this finding is repeated across many different consumer finance product markets, then it could have important implications for the Competition benefits consumers in many ways. On credit markets, benefits arise from the speed of interest rate adjustment. With low competition banks are slow to pass declining market rates through to debtors. With high competition banks are forced to react in a faster

What is the neutral real interest rate, and how can we use it
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The focus of this article is the neutral real interest rate. In order to understand the concept of a neutral real interest rate, it is first necessary to understand what we mean by the term 'real interest rate'. The interest rates that we observe in day-to-day life are almost always

Islamic banks' profitability in an interest rate cycle
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A Hassoune International journal of Islamic financial services, 2002 ifisa.co.za Some 180 Islamic banks together with about 120 Islamic non-bank financial institutions operate throughout the world. Their assets are close to US $200 billion, and the annual growth of their core business has been standing at about 10% over the last couple of years.

Simulated Likeliehood Estimation of Diffusions With an Application to the Short Tem Interest Rate
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Abstract: This paper develops a new econometric method to estimate continuous time processes from discretely sampled data. This method extends the maximum likelihood technique to cases where the transition density of the process cannot be computed in closed

Policy Duration Effect under the Zero Interest Rate Policy in 1999-2000: Evidence from Japan's Money Market Data
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This paper quantifies the policy duration effect of the zero interest rate policy implemented in Japan from February 1999 to August 2000. Our empirical analysis shows that the policy duration effect observed in Japanese financial markets emerged via the expectations

Monetary policy under zero interest rate: viewpoints of central bank economists
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Various proposals have been raised with respect to a desirable framework of monetary policy under the zero interest rate in Japan. By taking due account of such proposals, this paper intends to examine monetary policy options under the environment of the zero interest

The value of using interest rate derivatives to manage risk at US banking organizations
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Introduction and summary Commercial banks help their customers manage the financial risks they face. Of the risks that banks help to manage, one of the most important is interest rate risk. For example, suppose that we obtain a fixed rate mortgage from our bank. From our

DISCUSSION PAPER B {180 A TERM STRUCTURE MODEL AND THE PRICING OF INTEREST RATE DERIVATIVE
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Abstract. The paper developes a general arbitrage free model for the term structure of interest rates. The principal model is formulated in a discrete time structure. It di ers substantially from the Ho {Lee {Model (1986) and does not generate negative spot and

The valuation of default risk in corporate bonds and interest rate swaps
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Abstract This paper implements a model for the valuation of the default risk implicit in the prices of corporate bonds and interest rate swaps. The analytical approach considers the two essential ingredients in the valuation of corporate bonds: interest rate uncertainty and

News and interest rate expectations: a study of six central banks
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Abstract In this paper we analyse the effect of news relating to the expected path of monetary policy on interest rate futures. Central banks' transparency is in most respects much greater than it was a decade ago, and so central bank communication needs to be included as a

Interest rate sensitivities of REIT returns
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The risk and return characteristics of real estate investment trusts (REITs) have generated a considerable amount of research. Evidence from some REIT studies, Ross and Zisler (1987a, 1987b, 1991), Mengden and Hartzell (1986), Ennis and Burik (1991), and Gyourko

Evaluation of credit risk of a portfolio with stochastic interest rate and default processes
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Abstract. This paper proposes a new model for evaluating credit risk of a portfolio consisting of interest rate sensitive assets. Our model is distinguished from existing risk valuation models such as CreditMetricsor CREDITRISK+ by (1) the dynamics of the default-free

Retail interest rate pass-through: the Irish experience
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Abstract: In this paper, we examine the extent to which changes in the money market interest rate are passed through to a number of retail lending rates between 1980 and 2001. In addition, we analyse the speed of adjustment of these lending rates with respect to such

A vector error correction model (VECM) approach in explaining the relationship between interest rate and inflation towards exchange rate volatility in Malaysia
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Abstract: The exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rate plays a vital role in a country's level of trade, which is critical to most free market economies in the world. This paper is an attempt to analyze the

The effect of interest-rate changes on household saving and consumption: a survey
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Abstract Direct estimates of the interest elasticity of saving suffer from several serious problems. As an alternative, this survey uses an indirect approach that combines models of individual behavior with estimates of certain features of individuals' preferences. The paper Abstract A time-varying natural rate of interest is estimated for the euro area using a multivariate unobserved components model. The problem of aggregating interest rate data for the pre-EMU period is directly addressed, and a simple method is proposed in order to

Financial sector reforms and interest rate liberalization: The Kenya experience
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Abstract For financially repressed economies, financial liberalization was expected to allow for positive real interest rates, and for stimulating the mobilization and efficient allocation of domestic financial resources. At the same time, as the market becomes competitive the costs

Central bank communication and the publication of interest rate projections
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An explosion of interest in the subject of central bank communication has been seen in recent years. Whereas at one time clever obfuscation was prized, now there is almost a competition to be the most transparent. Central banks are graded on how they speak 2, and

The effects of interest rate spread on the level of non-performing assets: A case of commercial banks in Kenya
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KW Ng'etich Joseph Collins International Journal of Business and Public 2011 mku.ac.ke Abstract This study sought to establish the effects of interest rate spread on the level of Non Performing Assets in commercial banks in Kenya. This study adopted a descriptive research design on a sample of all commercial banks in Kenya operating by 2008 which are 43 in

Interest Rate Defense against Speculative Attack as a Signal. A Primer
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In the light of recent currency crises, two key policy questions are how to defend a currency against attack and what the effects of different avenues of defense are. A commonly used defense is to raise short-term interest rates sharply to deter speculation. Interest rate defense

Financial Condition Index and interest rate settings: a comparative analysis
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Abstract In the last thirty years, there has been a widespread move towards financial liberalisation, both within and across national borders. This economic development brought researchers to investigate the link between asset prices, inflation and the conduct of

World interest rate, business cycles, and financial intermediation in small open economies
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Abstract The consensus about the ability of the standard open-economy neoclassical growth model to account for interest-rate driven business cycles has changed over time: whereas early research concluded that business cycles are neutral to interest-rate shocks, more This paper presents a new approach to interest rate dynamics. We consider the general family of arbitrage-free positive interest rate models, valid on all time horizons, in the case of a discount bond system driven by a Brownian motion of one or more dimensions. We show

Dynamic causal chain of money, output, interest rate and prices in Malaysia: Evidence based on vector error-correction modelling analysis
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The dynamic causal chain among money, real output, interest rate, and inflation is reexamined in the context of a small fast-growing economy using the recently developed techniques of Johansen's multivariate cointegration analysis followed by vector error-

Equilibrium interest rate and the yield curve in a low interest rate environment
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Abstract Equilibrium nominal interest rates are useful indicators for both monetary policy authorities and market players. However, there are few studies which estimate Japan's equilibrium rate because of its persistent low interest rate. We overcome this challenge by

Long-term persistence in the real interest rate: Some evidence of a fractional unit root
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SUMMARY This study investigates the question of whether the real interest rate displays mean reversion. According to the Fisher equation, the nominal interest rate and expected ination move together one-for-one in the long run. For this to hold true, the real interest rate,

When Does an Interest Rate Path" look Good": Criteria for an Appropriate Future Interest Rate Path
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Abstract Svensson (2004) suggested that a monetary policy committee of a central bank (MPC) should find an instrument-rate path such that projections of inflation and output gap 'look good'. Academic literature on monetary policy gives guidance as to what the words Property-liability loss reserves have been historically maintained at full undiscounted value, while life insurance reserves are discounted. Proponents of the undiscounted value argue that, unlike P/L loss reserves, life insurance benefits are relatively certain and thus more

Stochastic volatility, mean drift, and jumps in the short-term interest rate
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Abstract We find that an intuitively appealing and fairly manageable continuous-time model provides an excellent characterization of the US short-term interest rate over the post Second World War period. Our three-factor jump-diffusion model consists of elements

Do interest rate, exchange rates effect stock returns A Pakistani Perspective
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Abstract This study examines the relationship between stock return, interest rate and exchange rates in Pakistani economy. For this, the data of short term interest rate, exchange rate (Rs/US $) and stock market returns (KSE-100) over the period of 1998-2009 is Although the HJM term structure model is widely accepted as the mostgeneral, and perhaps the most consistent, framework under which to studyinterest rate derivatives, the earlier models of Vasicek, Cox Ingersoll Ross, Hull White, andBlack Karasinski remain popular

Incomplete interest rate pass-through and optimal monetary policy
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Many recent empirical studies have reported that the pass- through from money-market rates to retail lending rates is far from complete in the euro area. This paper formally shows that when only a fraction of all the loan rates is adjusted in response to a shift in the policy rate, fluctuations

Real interest rate persistence: evidence and implications
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The real interest rate plays a central role in many important financial and macroeconomic models, including the consumption-based asset pricing model, neoclassical growth model, and models of the monetary transmission mechanism. The authors selectively survey the Zusammenfassung Risikopr mien und Wechselkurs: Ein multipler Zeitreihen-Ansatz zur Pr fung des Theorems der ungedeckten Zinsparit t. -Das Theorem der ungedeckten Zinsparit t besagt, daa die Zinsdifferenz zwischen zwei identischen Wertpapieren, die sich

International interest rate convergence: A survey of the issues and evidence
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The international integration of financial markets has increased dramatically over the last two decades. Techno logical advances and the progressive elimination of official barriers to capital flows have spurred an enormous increase in cross-border financial transactions and

Determinants of interest rate spreads in Sub-Saharan African countries: A dynamic panel analysis
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Efficient financial intermediation is an important factor in economic development process as it has implication for effective mobilisation of investible resources. Consequently, banking sector efficiency plays significant role in an economy. A major indicator of banking sector

Corporate Distress in East Asia: Assessing the Impact of Interest and Exchange Rate Shocks
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STIJN CLAESSENS, SIMEON DJANKOV, AND GIOVANNI FERRI he East Asian nancial crisis has been attributed in part to the weak performance and risky nancial structures of Asian corporations. Claessens, Djankov, and Lang [1998] document corporate performance

The euro interest rate swap market
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The euro interest rate swap market is one of the largest and most liquid financial markets in the world. Indeed, the swap curve is emerging as the preeminent benchmark yield curve in euro financial markets, against which even some government bonds are now often

The interest rate conditioning assumption
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A central bank's forecast must contain some assumption about the likely future path for its own policy-determined short-term interest rate. Most of those central banks who have publicly reported their procedures in this respect have assumed that interest rates would

The limitations of simple two-factor interest rate models
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ABSTRACT Empirical correlations between forward interest rates and the relative prices of caps and swaptions suggest that changes in forward rates with adjacent maturities should not be too highly correlated. This article shows that this is very difficult to achieve for a

Principals of risk: Finding value-at-risk through factor-based interest rate scenarios
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Abstract The Factor-Based approach to calculating VAR begins with a principal components analysis of the yield curve. This decomposes yield curve movements into a small number of underlying factors including a Shift factor that allows rates to rise or fall and a Twist factor

The social security trust fund, the riskless interest rate, and capital accumulation
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The social security trust fund in the United States currently has about $0.75 trillion in assets. Its assets are projected to grow to almost $2 trillion (1998 dollars) in the year 2016. As the baby-boom generation begins to retire and collect social security benefits in the second This paper examines the effect of exchange rate risk on interest rates within the uncovered interest rate parity condition for Turkey. When the interest rate is measured with the Treasury auction interest rate and the exchange rate risk is measured with the conditional variance of

Interest Rate Swaps
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'Jan Loeys is a Senior Economist in the Macroeconomics Section of the Research Department of the Federal Reserve Bank of Philadelphia. The author is indebted to Charles Gibson for helpful comments. assets. As a result, many firms look for ways to reduce the Abstract Money, Interest Rate Spreads, and Economic Activity. Numerous empirical studies for industrial countries have shown that the term structure of interest rates is a good indicator for future output growth. This paper analyzes whether the interest rate spread contains any

Interest rate parity, money market basis swaps, and cross-currency basis swaps
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Because the classic interest rate parity condition requires default-free rates as input, the common practice of using rates derived from swap curves is not valid. This paper derives interest rate parity conditions that depend on basis swap spreads in addition to swap rates.

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