Abstract Put-Call-Parity is a major cornerstone of the option pricing theory. The equ ation provides an answer to the equilibrium of the option market. It tells us what the right call option price should be assuming put price, actual stock price, risk free rate and maturity. The call price depends on these parameters. No arbitrage opportunities are possible if the equilibrium equation is met. In financially well developed countries and regions the put-call-parity holds and allows no arbitrage opportunities except in abnormal market conditions. This paper aims to analyse the put-call-parity in China for a certain period of time. It reviews if arbitrage opportunities can be identified. It shows that the put call-parity dominates the option market in China as well despite shorter pe riods in the development of the financial markets and allows no arbitrage opportunities.

Abstract This study has been conducted to investigate the relationship between the le verage, ownership structure and firm performance. The study used account ing based measured to measure the performance, which is return on assets (ROA) and return on equity (ROE) as dependent variables, while leverage, ownership proxies and other control variables as independent variables. The ownership proxies included the managerial ownership, institutional owner ship and family owned ownership while the control variables included the size of the firm and net income of the selected firms. This study has used panel data analysis while using data of 70 firms listed on Pakistan Stock Ex change, for the years 2010 to 2016. This study found negative but statistically significant relationship of leverage on firm performance with both ROA and ROE. Similarly managerial ownership, institutional ownership and family owned ownership have negative but statistically significant relationship with performance on listed companies Pakistan stock exchange.

Abstract Internal models may be used by banks to calculate their regulatory capital for credit risk. There are a variety of methodologies for estimating default proba bilities, which leads to major differences in credit provisions and capital re quirements. Using either a classical or a Bayesian technique, the computation of default probabilities can be ensured. Reduced form models are a choice. These models, however, might not be used to quantify economic capital be cause they assume independence among default events. Banks are compelled to employ structural models since defaults in the real world of banking are not solely due to exogenous causes. Because of the diversification effects be tween credit losses for one obligor and credit losses for other obligors in each bank’s portfolio, total unexpected losses do not equal the sum of individual unexpected losses. Those two types of models—reduced form and structural—are provided in either a theoretical or a numerical format. This paper covers both the classical and Bayesian techniques, with the latter employing a broader set of prior functions that offer considerably different probabilities.Distinguishing between imprudence, conservatism, and exaggeration might be difficult in the context of low default portfolios with scarce data. A realistic rule is proposed for finding the minimum and maximum bounds and there fore assessing the required conservatism margin by comparing classical and Bayesian probabilities.

Abstract In this paper, after conducting a series of alternative scenarios for various factors, we examine the implementation of Basel II capital adequacy rules on Greek Banks, according to the Internal Rating Based Approach (IRB), introduced by Basel II Accord. The IRB approach allows the development and use of models measuring the three main risks (credit, market, and operational). However, up to now, the researches that have been examined these risks for Greek Banks are very limited, and the impact of adverse events on the loan portfolio of the Greek Banking System has not yet been satisfactorily evaluated. In this empirical study, the Greek Banks are clustered into three separate groups, in particularly large, medium, and small size. The model formed provides information for supervisory reasons as for the level of capital maintained, depending on the nature of activities and risks taken by a Bank. The results show that the IRB approach is more appropriate for larger Banks, which can invest in risk management and maximize profit to risk ratios. For Banks with lower capital, this methodology could entail high risks. From the study, it was, also observed that retail portfolios and mortgage portfolios are favored due to credit risk, a benefit that is attributed to risk dispersion and collaterals (mortgages).

Abstract This paper examines factors affecting loan portfolio quality of MFIs in Haiti, over the period of October 2016 to September 2021, using a sample of four non-cooperative MFIs (MFI1, MFI2, MFI3 and MFI4) offering individual loans. This study applies the Ordinary Least Squares (OLS) regression to estimate the effects of two macroeconomic variables (exchange rate and inflation rate) and two micro-variables (loan amount per borrower and gross loan portfolio) on loan portfolio quality, measured by portfolio at risk over 30 days (PAR30). One statistical model has been specified for all MFIs and one statistical model has been specified for each MFI individually. Overall, the results show that portfolio at risk of MFIs can increase with the depreciation of local currency and as the inflation rises; but the results are not statistically significant. However, distinctively, the findings of MFI1 and MFI3 indicate a positive and statistically significant association with the exchange rate, while the output of MFI4 suggests a negative and insignificant relationship with the exchange rate. Only the result of MFI2 indicates a negative and insignificant relationship between the loan portfolio quality and the inflation rate. On the other hand, the growth of the loan portfolio affects adversely and significantly the loan portfolio at risk of MFIs globally and individually, except MFI3 that indicates a negative and insignificant association with the gross loan portfolio. Among the four MFIs, only the finding of MFI4 shows that the loan portfolio quality would significantly improve as the amount disbursed per borrower increases. In contrast, for the rest of MFIs, as the loan amount increases, the PAR30 would rise. Some implications can be drawn in light of these findings. Authorities should create a promising macroeconomic environment that would help MFIs to limit their credit risk. Moreover, MFIs should reinforce their credit analysis, collection procedures and practices, in order to ensure their loan portfolio growth, without compromising its quality .

Abstract This study empirically reviewed the implications of excessive internal borrowing and debt management with particular emphasis on Nigeria. The study covered the period from 2000 to 2020. The study examined the concept, growth, and causes of Nigeria’s domestic debt problem. It went further to study the strategies employed by government in managing domestic debt in Nigeria as well as the dominant factors that hampered domestic debt management which are poor management of borrowed funds, high cost of servicing domestic debt, excessive borrowings and rising budget deficit. Data were collected majorly from secondary source which includes Central Bank of Nigeria statistical bulletin, Debt Management Office publications and relevant journals and textbooks on financial system. Hypothesis were formulated, examining the impact of internal borrowings on Nigeria’s economy, it’s relationship with domestic debt servicing and its effect on rising budget deficit, and were tested and analyzed with the Regression analysis, correlation analysis, and the probability significance value using the Statistical Package for Social Science (SPSS) version 17. After the analysis, the work revealed that internal borrowings have affected the growth of the economy negatively, a positive relationship exists between domestic debt servicing and internal borrowings and that rising budget deficit has a negative impact on domestic debt. Based on these findings, the study recommends among others that the Federal Government should lay down well considered guidelines for internal loan, defining the purpose, duration, negotiation fee and conditions under which it can approve and guarantee a loan. Also limit domestic borrowings and mobilize untapped domestic resources as well as curb corruption in the country as borrowed funds are either misapplied or embezzled. If the Government and Debt Management Office employ the recommendations of this research,it would go a long way in boosting economic growth and development and to a positive extent ensure improvement in the overall economy of Nigeria.

Abstract Equity margin loan deals are loans to counterparties secured by collateral in the form of equities. Credit exposure arises when the equity collateral falls below the value of loan. During the life of the deal, the counterparty has to give more shares (or cash) to banks or brokerage houses in case of a fall in the share price, so that the level of the collateral amount stays approximately the same and does not deteriorate. The objective of this paper is to attempt to review the risks associated to margin loan deals and propose some suggestions to factor in certain margin call delays or liquidation uncertainties under the stressed COVID-19 situation. Moreover, we also showed a sample practical approach to measure the tail risk of margin loan which included the counterparty’s likely behavior under stress and used a callable bond pricing logic to assess the likely time and moral hazard problem of the counterparty to walk away from margin loans.

Abstract This paper aims at providing an in-depth analysis of forecasting ability of different GARCH (Generalized Autoregressive Conditional Heteroskedasticity) models and finding the best GARCH model for VaR estimation for crude oil. Analysis of VaR forecasting performance of different GARCH models is done using Kupiecs POF test, Christoffersens test and Backtesting VaR Loss Function. Crude oil is one of the most important fuel sources and has contributed to over a third of the world’s energy consumption. Oil shocks have influence on macroeconomic activities through various ways. Sharp oil price changes delay business investment because they raise uncertainty thus reducing aggregate output for some time. Analysis of crude oil prices trends is instrumental in informing the economy’s policy and decision making. Continued development and improvement of models used in analyzing prices improve forecasting accuracy which in turns leads to better costs and revenue prediction by businesses. The study uses Brent Crude Oil prices data over a period of ten years from the year 2011 to 2020. The study finds that the IGARCH T-distribution model is the best model out of the five models for VaR estimation based on LR.uc Statistic (0.235) and LR.cc Statistic (0.317) which are the least among the values realized. ME and RMSE for the five models used for forecasting have negligible difference. However, the IGARCH model stands out with IGARCH T-distribution being the best out of the five models in this study with ME of 0.0000963591 and RMSE of 0.05304335. We therefore conclude that the IGARCH T-distribution model is the best model out of the five models used in this study for forecasting Brent crude oil price volatility as well as for VaR estimations.

Abstract The recent financial crisis revealed that banks, especially these large and complex banks, are opaque to be monitored by regulators. In an ideal world, regulators are hoping all banks to be self-disciplined. That will reduce a lot burdens for regulators. However, in practice, it is not always the case as there will be by nature information asymmetric or information frictions between banks and regulators. We develop a tractable model to study how banks respond to capital requirements that are based on a self-assessment result about banks’ riskiness, and derive the policy and wealth implications. We use the model to characterize the optimal requirements, and to study the trade-offs a regulator faces in making efforts to ensure bank’s self-assessment more accurate or in disclosing the inspection results to public.

Abstract This paper first summarizes the development basis of Heilongjiang Free Trade Zone from the two aspects of optimal strategy and foreign trade, introduces the geographical environment and enterprise situation of Heilongjiang Free Trade Zone, and describes the main development focus of Harbin area, Heihe area and Suifenhe area. Among them, Harbin area focuses on system innovation, Heihe area focuses on cross-border e-commerce, and Suifenhe area focuses on developing Sino-Russian mutual trade. At the same time, summarize the basic situation of Heilongjiang financial market and Sino-Russian mutual trade. At present, Sino-Russian trade is developing well, but there are also some problems, such as Russia’s trade barriers. Secondly, from the perspective of policy support, the financial deepening situation of Heilongjiang Free Trade Zone is sorted out, mainly from the People’s Bank of China, State Administration of Foreign Exchange, China Credit Insurance Company and commercial banks to interpret the orientation of policies. Finally, by combining theory with practice, this paper analyzes the path of financial deepening in Heilongjiang Free Trade Zone affecting industrial transformation, fiscal revenue, trade and investment.

Abstract The study of the risk-return relationship of securities is decisive in order to appreciate in particular the attractiveness of a financial market. Using the Asymetric Response Model (ARM), we show that the level of risk taken by investors is insufficiently remunerated on the BRVM market with regard to the risk premium obtained. This result confirms the relevance of the ARM model in developing markets. It also underlines the need to rebalance the risk-return relationship on the BRVM in order to make it more attractive.

Abstract The study examined the effect of competitive strategies on life insurance uptake in Uganda using Kampala Central Business District as a case study. Specifically, the study examined the extent to which differentiation strategy, cost leadership strategy and distribution channel affect life insurance uptake in Uganda. A cross-sectional research design was used with a mixed research approach employing both qualitative and quantitative methods of data collection and analysis. A sample size of 306 respondents was selected from a study population of 1500 using of Krejcie & Morgan’s table. Data was analyzed using mean and standard deviation for descriptive analysis. Pearson’s correlation and regression analysis were also used to analyze the relationship between competitive strategies and life insurance uptake, and to determine the most significant predicator variable among the independent variables respectively. At bivariate level, differentiation strategy, cost leadership strategy and distribution channels had a significant positive relationship with life insurance uptake. The multiple regressions established that differentiation strategy, cost leadership strategy and distribution channels had a significant influence on life insurance uptake. The researchers recommend that there should be more differentiation of life insurance products and services offering, as this will enable companies to experience growth in the areas of premium volumes, market share, and profitability. The researchers also recommend that life insurance companies should design low insurance premium and product to allow even low income earners afford life insurance policies; and that there should be diversified product distribution channels such that customers are able to access reliable products and services at very competitive prices.

Abstract Banking sector development is considered as an essential driver of economic growth. Thus, this study examines the impact of the banking sector on the economic growth of Sierra Leone using indicators like bank liquidity reserve to bank asset ratio, domestic credit to private sectors, interest rate spread, gross domestic savings and deposit interest rate, and gross domestic product using yearly data from the period of 2001 to 2017. An empirical model was carried out using ordinary least square regression. From the outcomes of the regression, analysis, and results, GDP is strongly influenced by some of the banking indicators especially domestic credit to the private sector. It is seen that domestic credit to the private sector has a positive and significant impact on GDP, while deposit on interest rate has a positive but insignificant impact on GDP. The other indicators such as bank liquidity reserve, interest rate spread, and gross domestic savings neither have positive nor significant to GDP. Domestic credit to the private sector tends to have a positive impact.

Abstract In Asset and Liability Management (ALM) models, there are parameters whose values are not known with certainty at decision time, such as future asset returns, liability and contribution values. Simulation models generate possible “scenarios” for these parameters, which are used as inputs in the optimisation models and help thus in making decisions. These decisions can be evaluated in the sample, on the same scenarios that were used for making the decision, and out-of-sample, on a different, usually much larger, scenario set. With asset return simulation, the major difficulty lies in the multivariate nature of the data. We propose to capture this via the historical copula, making thus no distributional assumptions. We suggest the use of univariate sample generation which allows for different asset returns to be modelled by different distributions. The liabilities and contributions values have as a main source of uncertainty the population numbers; we propose to model this by adapting a model used in biology (BIDE). We use the resulting scenario generator in four different ALM optimisation models, using a dataset from the largest Saudi Arabian pension fund and the Saudi Arabian market index.

Abstract Although the containment of the COVID-19 pandemic has achieved a critical victory in China since 2020, it has undeniably brought a huge impact on the economy. Especially for the small and medium-sized enterprises (SMEs) located at the end of the industrial chain, whose comprehensive strength is weak, they are generally facing severe survival challenges. Under the complex and severe situation, a financing bailout can not solve the fundamental problem, but it is an effective way to alleviate the urgent needs of the SMEs. This paper systematically reviews the impact of the pandemic on the SMEs’ financing, the limitations of the SMEs’ financing channels, the problems of the SMEs exposed by “financing difficulties” during the pandemic, and how to promote financing and help the SMEs strengthen and expand.

Abstract While many resources are available for people to increase their financial knowledge in Switzerland, recent studies indicate that the level of financial literacy is relatively low across nations. To gather the data, a quantitative online survey was conducted among young people in Switzerland. Overall, important demographic differences in financial literacy levels were found for the gender and education variables. Firstly, young men show a higher financial literacy score than women and invest more than women. In addition, individuals with a university degree scored better at the financial literacy questions than those without and were more likely to invest. However, no conclusion could be made about the relationship between income and financial literacy. The main reason why people did not invest constitutes a lack of knowledge. Unsurprisingly, individuals with lower financial literacy tend to make more financial mistakes, save less for retirement, and accumulate less wealth in their lives.