IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/62304.html
   My bibliography  Save this paper

Banks exposure to market risks

Author

Listed:
  • Galy, Michel

Abstract

Maturity transformation coupled with open foreign exchange positions expose financial intermediaries to unexpected changes in interest and exchange rates. This paper proposes to measure the degree of banks exposure to market risks by taking the variance of the total differential of the bank net-wealth against these prices.

Suggested Citation

  • Galy, Michel, 1989. "Banks exposure to market risks," MPRA Paper 62304, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62304
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/62304/1/MPRA_paper_62304.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
    2. Frederick R. Macaulay, 1938. "Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856," NBER Books, National Bureau of Economic Research, Inc, number maca38-1, July.
    3. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1979. "Duration and the Measurement of Basis Risk," The Journal of Business, University of Chicago Press, vol. 52(1), pages 51-61, January.
    4. Gaab, W. & Granziol, M. J. & Horner, M., 1986. "On some international parity conditions : An empirical investigation," European Economic Review, Elsevier, vol. 30(3), pages 683-713, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luís Oliveira & João Vidal Nunes & Luís Malcato, 2014. "The performance of deterministic and stochastic interest rate risk measures:," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(3), pages 141-165, December.
    2. Oh Kwon, 2007. "Duration, factor sensitivities, and interest rate Greeks," Annals of Finance, Springer, vol. 3(4), pages 471-486, October.
    3. H. Jaffal & Y. Rakotondratsimba & A. Yassine, 2017. "Sensitivities under G2++ model of the yield curve," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-38, March.
    4. Kau, James B. & Keenan, Donald C., 1999. "Patterns of rational default," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 765-785, November.
    5. Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February.
    6. Long H. Vo, 2014. "Application of Kalman Filter on modelling interest rates," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 1-15, March.
    7. Dai, Qiang & Singleton, Kenneth J., 2003. "Fixed-income pricing," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 20, pages 1207-1246, Elsevier.
    8. Guidolin, Massimo & Thornton, Daniel L., 2018. "Predictions of short-term rates and the expectations hypothesis," International Journal of Forecasting, Elsevier, vol. 34(4), pages 636-664.
    9. Francis X. Diebold & Lei Ji & Canlin Li, 2006. "A Three-Factor Yield Curve Model: Non-Affine Structure, Systematic Risk Sources and Generalized Duration," Chapters, in: Lawrence R. Klein (ed.), Long-run Growth and Short-run Stabilization, chapter 9, Edward Elgar Publishing.
    10. Stephen A. Buser & G. Andrew Karolyi & Anthony B. Sanders, "undated". "Adjusted Forward Rates as Predictors of Future Spot Rates," Research in Financial Economics 9605, Ohio State University.
    11. Kung, James J. & Wu, E-Ching, 2013. "An evaluation of some popular investment strategies under stochastic interest rates," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 94(C), pages 96-108.
    12. Gatzert, Nadine & Martin, Michael, 2012. "Quantifying credit and market risk under Solvency II: Standard approach versus internal model," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 649-666.
    13. Jacky So & Jason Z. Wei, 2004. "Deposit Insurance and Forbearance Under Moral Hazard," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(4), pages 707-735, December.
    14. Berardi, Andrea, 1995. "Estimating the Cox, ingersoll and Ross model of the term structure: a multivariate approach," Ricerche Economiche, Elsevier, vol. 49(1), pages 51-74, March.
    15. Roberds, William & Whiteman, Charles H., 1999. "Endogenous term premia and anomalies in the term structure of interest rates: Explaining the predictability smile," Journal of Monetary Economics, Elsevier, vol. 44(3), pages 555-580, December.
    16. Lekkos, Ilias & Milas, Costas, 2004. "Time-varying excess returns on UK government bonds: A non-linear approach," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 45-62, January.
    17. Gantenbein,, 2016. "Unternehmerisches Finanzmanagement – Meilensteine der Entwicklung," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 70(4), pages 387-406.
    18. Andrew H. Chen & Mohammed M. Chaudhury, 1996. "The Market Value and Dynamic Interest Rate Risk of Swaps," Center for Financial Institutions Working Papers 96-44, Wharton School Center for Financial Institutions, University of Pennsylvania.
    19. James Kau & Donald Keenan, 1999. "Catastrophic Default and Credit Risk for Lending Institutions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 15(2), pages 87-102, March.
    20. Bacinello, Anna Rita, 2000. "Valuation of contingent-claims characterising particular pension schemes," Insurance: Mathematics and Economics, Elsevier, vol. 27(2), pages 177-188, October.

    More about this item

    Keywords

    Banks net worth; assets valuation; duration; volatility; market risks; interest rate risk; foreign exchange risk; interest rate term structure;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:62304. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.