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Impact of Market Changes and Regulatory Measures on Accuracy of Bond Valuation in Portfolios of Russian Credit Institutions

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  • Evgeny Danilov

    (Bank of Russia)

Abstract

This paper uses conditional discrete information entropy to study of how changes in the market and the regulatory measures modifying the procedure for reporting the fair value of securities in financial statements affect the accuracy of bond valuation in the portfolios of Russian credit institutions. It considers the degree of price dispersion in the period from April 2018 to March 2023. The estimated measure of uncertainty in pricing gives a numerical description of the consensus of the banking sector regarding the value of debt securities. The results obtained allow the conclusion that Russian credit institutions follow the international financial reporting standards and tend to value their bond portfolios according to the market value, instead of taking advantage of regulatory relief. At the same time, changes in the market itself due to the recent sanctions pressure have led to increased uncertainty and a decrease in the concentration of valuations.

Suggested Citation

  • Evgeny Danilov, 2023. "Impact of Market Changes and Regulatory Measures on Accuracy of Bond Valuation in Portfolios of Russian Credit Institutions," Russian Journal of Money and Finance, Bank of Russia, vol. 82(4), pages 108-125, December.
    • Handle: RePEc:bkr:journl:v:82:y:2023:i:4:p:108-125
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    References listed on IDEAS

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    More about this item

    Keywords

    entropy; information theory; probability density; uncertainty measure; pricing; securities;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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