credit risk is defined as a situation in which the liability itself and its interests are not paid back based on the terms determined in contract. in fact, it is considered as the most important risk each bank has to encounter, among the ones present in banking operations, which is actually because of bank's later life being dependent on it. therefore, carefully taken into account, the fac...

for banks and financial institutions, credit risk had been an essential factor that needed to be managed well. credit risk was the possibility that a borrower of counter party would fail to meet its obligations in accordance with agreed terms. credit risk; therefore arise from the bank’s dealings with or lending to corporate, individuals, and other banks or financial institutions.  credit risk...

Article history: Received 11 December 2008 Received in revised form 25 August 2009 Accepted 21 September 2009 Available online 15 October 2009 Using data from prewar Japan, this paper investigates the impact of a liquidity shock induced by depositors' behavior on bank portfolio management during financial crises in a system lacking deposit insurance. It is found that banks reacted to the liquid...

Capital protected structured products are popular with both investors and investment banks. A number of strategies ranging in complexity and cost exist that provide a minimum guaranteed payoff at maturity. In this paper the performance of Constant Proportion Portfolio Insurance (CPPI), a major strategy in the market, is evaluated against two simple strategies: a risk-free and a gapless investme...

Capital protected structured products are popular with both investors and investment banks. A number of strategies ranging in complexity and cost exist that provide a minimum guaranteed payoff at maturity. In this paper the performance of Constant Proportion Portfolio Insurance (CPPI), a major strategy in the market, is evaluated against two simple strategies: a risk-free and a gapless investme...

In this paper we investigate audit pricing for financial institutions. We modify the standard audit fee model for industrial companies by incorporating measures of risk and complexity that are either unique to or more relevant for banks, and that are used by bank regulatory agencies. For a sample of 277 financial institutions in fiscal 2000, we find that audit fees are higher for banks having m...

We collect information about multinational banks’ internal capital markets from interviews with over 400 bank CEOs across emerging Europe. Using these unique data, we document substantial variation in how banks financially manage foreign subsidiaries and then assess how this variation affected local credit growth during the Great Recession. We show that subsidiaries grew faster if the parent ba...

The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by the use of this measure. We then discuss...

One of the major problem faced by banks is how to manage the risk exposure in large portfolios. According to Basel II regulation banks has to measure the risk using Value-at-Risk with confidence level 99%. However, this regulation does not specify the way to calculate Valueat-Risk. The easiest way to calculate Value-at-Risk is to assume that portfolio returns are normally distributed. Altough, ...

Banking regulations set minimum levels of capital for banks. These requirements are generally formulated through a ratio of capital to risk-weighted assets. A risk-weighting scheme assigns a weight to each asset or category of assets and effectively functions as a linear constraint on a bank’s portfolio choice; it also changes the incentives for banks to hold various kinds of assets. In this pa...