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Internal Valuation Of Assets With Liquidity Risk
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Book Synopsis Internal Valuation of Assets with Liquidity Risk by : Bert-Jan Nauta
Download or read book Internal Valuation of Assets with Liquidity Risk written by Bert-Jan Nauta and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The inclusion of funding costs in the valuation of derivatives resulting in the so-called funding valuation adjustment (FVA) is a topic of intense debate, model development, and research. One issue with standard formulations of FVA is that it is the same for liquid and illiquid assets. Even if assets can be liquidated in a matter of days without discount, FVA implies that funding costs for the full term are included in the valuation. This paper studies the effect of liquidity risk on the valuation of assets through a simple model. This model assumes a Poisson process for liquidity stress events (LSEs) of random duration. In an LSE, a bank needs to liquidate an asset if the funding term is not sufficient to keep the asset funded throughout the LSE. We show that this model generates an FVA and liquidity spread. Both vanish when the asset is perfectly liquid. It is also possible to determine an optimal funding term in this model.
Book Synopsis A Model for the Valuation of Assets with Liquidity Risk by : Bert-Jan Nauta
Download or read book A Model for the Valuation of Assets with Liquidity Risk written by Bert-Jan Nauta and published by . This book was released on 2016 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. The new feature of this model is that it explicitly incorporates the funding term of an asset. The inclusion of the funding term is important since it determines the expected liquidation loss. By minimizing the sum of the expected liquidation loss and funding costs the optimal funding term and value of the asset can be determined. This paper applies the model to single cash flows, loans, bonds, and derivatives. Also, the calibration to LIBOR basis spreads is discussed.
Book Synopsis Asset-Liability and Liquidity Management by : Pooya Farahvash
Download or read book Asset-Liability and Liquidity Management written by Pooya Farahvash and published by John Wiley & Sons. This book was released on 2020-05-26 with total page 1056 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset-Liability and Liquidity Management distils the author’s extensive experience in the financial industry, and ALM in particular, into concise and comprehensive lessons. Each of the topics are covered with a focus on real-world applications, based on the author’s own experience in the industry. The author is the Vice President of Treasury Modeling and Analytics at American Express. He is also an adjunct Professor at New York University, teaching a variety of analytical courses. Learn from the best as Dr. Farahvash takes you through basic and advanced topics, including: The fundamentals of analytical finance Detailed explanations of financial valuation models for a variety of products The principle of economic value of equity and value-at-risk The principle of net interest income and earnings-at-risk Liquidity risk Funds transfer pricing A detailed Appendix at the end of the book helps novice users with basic probability and statistics concepts used in financial analytics.
Book Synopsis International Convergence of Capital Measurement and Capital Standards by :
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Investment Decisions on Illiquid Assets by : Jaroslaw Morawski
Download or read book Investment Decisions on Illiquid Assets written by Jaroslaw Morawski and published by Springer Science & Business Media. This book was released on 2009-02-14 with total page 467 pages. Available in PDF, EPUB and Kindle. Book excerpt: Jaroslaw Morawski offers a practicable and theoretically well-founded solution to the problems encountered when investing in illiquid assets and develops a model of the liquidation process for this category of investments. The result is a coherent investment decision framework designed specifically for private real estate but applicable also to other illiquid assets.
Book Synopsis Liquidity Management by : Aldo Soprano
Download or read book Liquidity Management written by Aldo Soprano and published by John Wiley & Sons. This book was released on 2015-02-26 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: Robust management of liquidity risk within the changing regulatory framework Liquidity Management applies current risk management theory, techniques, and processes to liquidity risk control and management to help organizations prepare in case of future economic crisis and changing regulatory framework. Based on extensive research conducted on banks' datasets, this book addresses the practical challenges and critical issues that frequently go unmentioned, and discusses the recent impact of sovereign crises on banks' liquidity processes and approaches. Market practices and regulatory stances are reviewed and compared to bank treasuries' response to liquidity crunches, refinancing risks are explored in the context of Basel 3, and alternative funding is analyzed in terms of resilience and allocation. Coverage includes the recent crisis, new regulations, and the techniques, processes, and strategies banks use in managing liquidity risk. The 2008 and 2010 crises brought liquidity risk out of the shadows as even profitable and well-capitalized banks were swept away with breathtaking speed. This book reviews modeling and internal process design in the context of the structural change in market conditions on banks' refinancing and control requirements, helping readers rethink and re-design their organization's approach to liquidity risk. Understand the new liquidity regulatory framework and the implications for banks Study the latest liquidity measurement models, with stress testing and scenario analysis Discover the effect of illiquid financing markets and possible lasting impacts Compare market liquidity and warning signals that detect further deterioration With much of the world still reeling from history, it's important that liquidity risk become a major focus going forward. This practical guide provides valuable information, but also real, actionable steps that can be taken today to forecast and mitigate risks with an eye toward greater stability and security. Liquidity Management is a thorough, comprehensive guide to a more robust management of liquidity risk.
Book Synopsis Risk Management and Value by : Mondher Bellalah
Download or read book Risk Management and Value written by Mondher Bellalah and published by World Scientific. This book was released on 2008 with total page 645 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive discussion of the issues related to risk, volatility, value and risk management. It includes a selection of the best papers presented at the Fourth International Finance Conference 2007, qualified by Professor James Heckman, the 2000 Nobel Prize Laureate in Economics, as a ?high level? one. The first half of the book examines ways to manage risk and compute value-at-risk for exchange risk associated to debt portfolios and portfolios of equity. It also covers the Basel II framework implementation and securitisation. The effects of volatility and risk on the valuation of financial assets are further studied in detail.The second half of the book is dedicated to the banking industry, banking competition on the credit market, banking risk and distress, market valuation, managerial risk taking, and value in the ICT activity. With its inclusion of new concepts and recent literature, academics and risk managers will want to read this book.
Book Synopsis Accounting for Financial Instruments by : Emanuel Camilleri
Download or read book Accounting for Financial Instruments written by Emanuel Camilleri and published by Routledge. This book was released on 2017-05-12 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting for Financial Instruments is about the accounting and regulatory framework associated with the acquisition and disposal of financial instruments; how to determine their value; how to manage the risk connected with them; and ultimately compile a business valuation report. Specifically, the book covers the following topics, amongst others: Accounting for Investments; Bills of exchange; Management of Financial Risks; Financial Analysis (including the Financial Analysis Report); Valuation of a business (including the Business Valuation Report) and Money laundering. Accounting for Financial Instruments fills a gap in the current literature for a comprehensive text that brings together relevant accounting concepts and valid regulatory framework, and related procedures regarding the management of financial instruments (investments), which are applicable in the modern business world. Understanding financial risk management allows the reader to comprehend the importance of analysing a business concern. This is achieved by presenting an analytical framework to illustrate that an entity’s performance is greatly influenced by its external and internal environments. The analysis of the external environment examines factors that impact an entity’s operational activities, strategic choices, and influence its opportunities and risks. The analysis of the internal environment applies accounting ratio analysis to an entity’s financial statements to examine various elements, including liquidity, profitability, asset utilisation, investment, working capital management and capital structure. The objective of the book is to provide a fundamental knowledge base for those who are interested in managing financial instruments (investments) or studying banking and finance or those who wish to make financial services, particularly banking and finance, their chosen career. Accounting for Financial Instruments is highly applicable to both professional accountants and auditors and students alike.
Book Synopsis Valuation of Illiquid Assets on Bank Balance Sheets by : Bert-Jan Nauta
Download or read book Valuation of Illiquid Assets on Bank Balance Sheets written by Bert-Jan Nauta and published by . This book was released on 2015 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most of the assets on the balance sheet of a typical bank are illiquid. Therefore, liquidity risk is one of the key risks for banks. Since the risks of an asset affect its value, liquidity risk should be included in their valuation. Although models have been developed to include liquidity risk in the pricing of traded assets, these models do not easily extend to truly illiquid or non-traded assets. This paper develops a valuation framework for liquidity risk for these illiquid assets. Liquidity risk for illiquid assets is identified as the risk of assets being liquidated at a discount in a liquidity stress event (LSE). Whether or not a bank decides to liquidate an asset depends on its liquidation strategy. The appropriate strategy for valuation purposes is shown to be a pro rata liquidation. The main result is that the discount rate used for valuation includes a liquidity spread that is composed of three factors: 1. the probability of an LSE, 2. the severity of an LSE, and 3. the liquidation value of the asset.
Book Synopsis Liquidity and Asset Prices by : Yakov Amihud
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Book Synopsis An Introduction to Banking by : Moorad Choudhry
Download or read book An Introduction to Banking written by Moorad Choudhry and published by John Wiley & Sons. This book was released on 2011-09-07 with total page 278 pages. Available in PDF, EPUB and Kindle. Book excerpt: "A great write-up on the art of banking. Essential reading for anyone working in finance." Dan Cunningham, Senior Euro Cash & OBS Dealer, KBC Bank NV, London "Focused and succinct review of the key issues in bank risk management." Graeme Wolvaardt, Head of Market Risk Control, Europe Arab Bank plc, London The importance of banks to the world's economic system cannot be overstated. The foundation of consistently successful banking practice remains efficient asset-liability management and liquidity risk management. This book introduces the key concepts of banking, concentrating on the application of robust risk management principles from a practitioner viewpoint, and how to incorporate these principles into bank strategy. Detailed coverage includes: Bank strategy and capital Understanding the yield curve Principles of asset-liability management Effective liquidity risk management The role of the bank ALM committee Written in the author's trademark accessible style, this book is a succinct and focused analysis of the core principles of good banking practice.
Book Synopsis Financial Modeling, Actuarial Valuation and Solvency in Insurance by : Mario V. Wüthrich
Download or read book Financial Modeling, Actuarial Valuation and Solvency in Insurance written by Mario V. Wüthrich and published by Springer Science & Business Media. This book was released on 2013-04-04 with total page 438 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risk management for financial institutions is one of the key topics the financial industry has to deal with. The present volume is a mathematically rigorous text on solvency modeling. Currently, there are many new developments in this area in the financial and insurance industry (Basel III and Solvency II), but none of these developments provides a fully consistent and comprehensive framework for the analysis of solvency questions. Merz and Wüthrich combine ideas from financial mathematics (no-arbitrage theory, equivalent martingale measure), actuarial sciences (insurance claims modeling, cash flow valuation) and economic theory (risk aversion, probability distortion) to provide a fully consistent framework. Within this framework they then study solvency questions in incomplete markets, analyze hedging risks, and study asset-and-liability management questions, as well as issues like the limited liability options, dividend to shareholder questions, the role of re-insurance, etc. This work embeds the solvency discussion (and long-term liabilities) into a scientific framework and is intended for researchers as well as practitioners in the financial and actuarial industry, especially those in charge of internal risk management systems. Readers should have a good background in probability theory and statistics, and should be familiar with popular distributions, stochastic processes, martingales, etc.
Book Synopsis Asset Pricing with Liquidity Risk by : Viral V. Acharya
Download or read book Asset Pricing with Liquidity Risk written by Viral V. Acharya and published by . This book was released on 2004 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Quantitative Liquidity Model for Banks by : Christian Schmaltz
Download or read book A Quantitative Liquidity Model for Banks written by Christian Schmaltz and published by Springer Science & Business Media. This book was released on 2010-05-30 with total page 238 pages. Available in PDF, EPUB and Kindle. Book excerpt: Christian Schmaltz identifies product cash flows, funding spread, funding capacity, haircuts, and short-term interest rates as key liquidity variables. Then, he assumes specific stochastic processes for the key variables leading to a particular liquidity model. The model is used to derive liquidity funds transfer prices and to optimally manage liquidity.
Book Synopsis Valuation Based on Earnings by : Robert A. G. Monks
Download or read book Valuation Based on Earnings written by Robert A. G. Monks and published by John Wiley & Sons. This book was released on 2011-04-27 with total page 581 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Valuation for Portfolio Investment "The valuation of securities . . . is as big a subject as they come, running in multi?-dimensions from qualitative to psychological, from static todynamic, from one dominant measure to a complex soup, and using measures that range from those that are internal to the observer to those determined bythe markets. In Corporate Valuation for Portfolio Investment, Bob andhis worthy coauthor cover the full range of valuation methods." From the Foreword by Dean LeBaron Corporate valuation for portfolio investment means determining the present value of future worth. While this may sound like a straightforward task, in reality, it takes time and hard-earned experience to effectively perform this essential financial function. Robert Monks and Alexandra Lajoux understand the difficulty of this endeavor. That's why they have created Corporate Valuation for Portfolio Investment. Filled with in-depth insights and expert advice, this reliable guide addresses the many facets of valuation and reveals what it takes to determine the value of corporate equity securities for the purpose of portfolio investment. Written with the professional investor in mind, Corporate Valuation for Portfolio Investment takes you through a wide range of approaches including those primarily based in assets, earnings, cash flow, and securities prices and discusses hybrid valuation techniques that combine aspects of these four main sources of valuation information. Along the way, it also examines the importance of qualitative measures such as governance and details a variety of special situations in the life cycle of businesses, including stock splits, spin-offs, and pension funding. If you're seeking superior returns from investments in corporate equity, then you have to have a firm understanding of valuation. With Corporate Valuation for Portfolio Investment as your guide, you'll be in a better position to improve your sense of a company's worth and the possible price ranges for buy, sell, and hold decisions.
Book Synopsis Corporate Valuation for Portfolio Investment by : Robert A. G. Monks
Download or read book Corporate Valuation for Portfolio Investment written by Robert A. G. Monks and published by John Wiley & Sons. This book was released on 2010-10-01 with total page 581 pages. Available in PDF, EPUB and Kindle. Book excerpt: A detailed guide to the discipline of corporate valuation Designed for the professional investor who is building an investment portfolio that includes equity, Corporate Valuation for Portfolio Investment takes you through a range of approaches, including those primarily based on assets, earnings, cash flow, and securities prices, as well as hybrid techniques. Along the way, it discusses the importance of qualitative measures such as governance, which go well beyond generally accepted accounting principles and international financial reporting standards, and addresses a variety of special situations in the life cycle of businesses, including initial public offerings and bankruptcies. Engaging and informative, Corporate Valuation for Portfolio Investment also contains formulas, checklists, and models that the authors, or other experts, have found useful in making equity investments. Presents more than a dozen hybrid approaches to valuation, explaining their relevance to different types of investors Charts stock market trends, both verbally and visually, enabling investors to think like traders when needed Offers valuation guidance based on less quantitative factors, namely management quality and factors relating to the company and the economy Corporate Valuation for Portfolio Investment puts this dynamic discipline in perspective and presents proven ways to determine the value of corporate equity securities for the purpose of portfolio investment.
Author :The Law The Law Library Publisher :Createspace Independent Publishing Platform ISBN 13 :9781727517682 Total Pages :208 pages Book Rating :4.5/5 (176 download)
Book Synopsis Liquidity Coverage Ratio - Liquidity Risk Measurement Standards (Us Federal Deposit Insurance Corporation Regulation) (Fdic) (2018 Edition) by : The Law The Law Library
Download or read book Liquidity Coverage Ratio - Liquidity Risk Measurement Standards (Us Federal Deposit Insurance Corporation Regulation) (Fdic) (2018 Edition) written by The Law The Law Library and published by Createspace Independent Publishing Platform. This book was released on 2018-09-21 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity Coverage Ratio - Liquidity Risk Measurement Standards (US Federal Deposit Insurance Corporation Regulation) (FDIC) (2018 Edition) The Law Library presents the complete text of the Liquidity Coverage Ratio - Liquidity Risk Measurement Standards (US Federal Deposit Insurance Corporation Regulation) (FDIC) (2018 Edition). Updated as of May 29, 2018 The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Board), and the Federal Deposit Insurance Corporation (FDIC) are adopting a final rule that implements a quantitative liquidity requirement consistent with the liquidity coverage ratio standard established by the Basel Committee on Banking Supervision (BCBS). The requirement is designed to promote the short-term resilience of the liquidity risk profile of large and internationally active banking organizations, thereby improving the banking sector's ability to absorb shocks arising from financial and economic stress, and to further improve the measurement and management of liquidity risk. The final rule establishes a quantitative minimum liquidity coverage ratio that requires a company subject to the rule to maintain an amount of high-quality liquid assets (the numerator of the ratio) that is no less than 100 percent of its total net cash outflows over a prospective 30 calendar-day period (the denominator of the ratio). The final rule applies to large and internationally active banking organizations, generally, bank holding companies, certain savings and loan holding companies, and depository institutions with $250 billion or more in total assets or $10 billion or more in on-balance sheet foreign exposure and to their consolidated subsidiaries that are depository institutions with $10 billion or more in total consolidated assets. The final rule focuses on these financial institutions because of their complexity, funding profiles, and potential risk to the financial system. Therefore, the agencies do not intend to apply the final rule to community banks. In addition, the Board is separately adopting a modified minimum liquidity coverage ratio requirement for bank holding companies and savings and loan holding companies without significant insurance or commercial operations that, in each case, have $50 billion or more in total consolidated assets but that are not internationally active. The final rule is effective January 1, 2015, with transition periods for compliance with the requirements of the rule. This book contains: - The complete text of the Liquidity Coverage Ratio - Liquidity Risk Measurement Standards (US Federal Deposit Insurance Corporation Regulation) (FDIC) (2018 Edition) - A table of contents with the page number of each section
