arXiv · arXiv q-fin · 2026
We develop a continuous-time structural dynamic model to determine the exact insolvency regions of banks arising from the non-linear interaction between liquidity and credit risk. While existing literature predominantly treats these risks in isolation or via reduced-form specifications, we explicitly model the feedback loop where funding shocks and regulatory constraints force balance-sheet adjustments that can lead …
Nader Karimi, Davood Ahmadian
arXiv · arXiv q-fin · 2020
Microfinance provides strength to boost the economic activities of low-income earners and thus contributes to eradication of poverty. However, microfinance institutions face stringent competition from commercial banks; the growth of microloan activities of commercial banks may confront microfinance institutions with increased competition for borrowers. In Kenya, the micro finance sector has extremely high competition…
King'ori S. Ngumo, Kioko W. Collins, Shikumo H. David
arXiv · arXiv q-fin · 2020
Small and Medium Enterprises (SMEs) access to external finance is an issue of significant research interest to academicians. Commercial banks consider many SMEs not to be credit worthy because of their inability to meet some banking requirements. Hence, the objective of this study was to investigate what determines lending to SMEs by commercial banks in Kenya. To achieve the study objectives, a descriptive research d…
David Haritone Shikumo, Mwangi Mirie
arXiv · arXiv q-fin · 2024
This paper examines the pivotal role central banks play in advancing sustainable finance, a crucial component in addressing global environmental and social challenges. As supervisors of financial stability and economic growth, central banks have dominance over the financial system to influence how a country moves towards sustainable economy. The chapter explores how central banks integrate sustainability into their m…
A T M Omor Faruq, Md Toufiqul Huq
arXiv · arXiv q-fin · 2019
Recent developments in the literature on financial architecture suggest that banks and markets not only coexist, but also coevolve in ways that are non-neutral from the viewpoint of optimality. This article aims to analyse the concrete mechanisms of this coevolution by focusing on a very relevant case study: Belgium (the first Continental country to industrialize) at the time of the very first emergence of a modern f…
Stefano Ugolini
OpenAlex · American Economic Review · 2000 · cites 2549
We study the monetary-transmission mechanism with a data set that includes quarterly observations of every insured U.S. commercial bank from 1976 to 1993. We find that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets—i.e., banks with lower ratios of securities to assets. Moreover, this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of…
Anil Kashyap, Jeremy C. Stein
arXiv · arXiv q-fin · 2016
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB (Exposed-Distressed-Bankrupted) model for the dynamics of liquidity shocks reverberation between banks, and validate it on electronic market for interbank deposits data. We show that the inte…
Giuseppe Brandi, Riccardo Di Clemente, Giulio Cimini
arXiv · arXiv q-fin · 2016
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations. On the other hand, solvency constraints may force banks to recover lost fundings by selling their illiquid assets, resulting in effective losses in the presence of fire sales - th…
Giulio Cimini, Matteo Serri
arXiv · arXiv q-fin · 2010
If the probability of default parameters (PDs) fed as input into a credit portfolio model are estimated as through-the-cycle (TTC) PDs stressed market conditions have little impact on the results of the capital calculations conducted with the model. At first glance, this is totally different if the PDs are estimated as point-in-time (PIT) PDs. However, it can be argued that the reflection of stressed market condition…
Norbert Jobst, Dirk Tasche
arXiv · arXiv q-fin · 2021
This study evaluates the effect of collection policy on portfolio quality of microfinance banks in Adamawa State, Nigeria. Real data were collected from 51 credit officers, then a multi-stage sampling method was used to select a sample of 21 respondents from the population (i.e., 51 credit officers). In addition, we used regression analysis and descriptive statistics to analyze the data collected and to also test our…
Esther Yusuf Enoch, Abubakar Mahmud Digil, Usman Abubakar Arabo
arXiv · arXiv q-fin · 2021
Model risk in credit portfolio models is a serious issue for banks but has so far not been tackled comprehensively. We will demonstrate how to deal with uncertainty in all model parameters in an all-embracing, yet easy-to-implement way.
Christian Meyer
arXiv · arXiv q-fin · 2014
We present an analysis of the credit market of Japan. The analysis is performed by investigating the bipartite network of banks and firms which is obtained by setting a link between a bank and a firm when a credit relationship is present in a given time window. In our investigation we focus on a community detection algorithm which is identifying communities composed by both banks and firms. We show that the clusters …
Luca Marotta, Salvatore Miccichè, Yoshi Fujiwara, Hiroshi Iyetomi, Hideaki Aoyama
arXiv · arXiv q-fin · 2006
Using a data set which includes all transactions among banks in the Italian money market, we study their trading strategies and the dependence among them. We use the Fourier method to compute the variance-covariance matrix of trading strategies. Our results indicate that well defined patterns arise. Two main communities of banks, which can be coarsely identified as small and large banks, emerge.
Giulia Iori, Roberto Reno', Giulia De Masi, Guido Caldarelli
arXiv · arXiv · 2019
Systemic liquidity risk, defined by the IMF as "the risk of simultaneous liquidity difficulties at multiple financial institutions", is a key topic in macroprudential policy and financial stress analysis. Specialized models to simulate funding liquidity risk and contagion are available but they require not only banks' bilateral exposures data but also balance sheet data with sufficient granularity, which are hardly a…
V. Macchiati, G. Brandi, G. Cimini, G. Caldarelli, D. Paolotti
arXiv · arXiv q-fin · 2024
Fiat-pegged stablecoins are by nature exposed to spillover effects during market turmoil in Traditional Finance (TradFi). We observe a difference in TradFi market shocks impact between various stablecoins, in particular, USD Coin (USDC) and Tether USDT (USDT), the former with a higher reporting frequency and transparency than the latter. We investigate this, using top USDC and USDT liquidity pools in Uniswap, by adap…
Walter Hernandez Cruz, Jiahua Xu, Paolo Tasca, Carlo Campajola
arXiv · arXiv q-fin · 2013
We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation between sector spreads and rate shifts. However, we also observe that the correlations between spreads and Treasury twists reversed recently, which is likely attributable to the Fe…
Arthur M. Berd, Elena Ranguelova, Antonio Baldaque da Silva
arXiv · arXiv · 2025
In the LIBOR era, banks routinely tied revolving credit facilities to credit-sensitive benchmarks. This study assesses the Across-the-Curve Credit Spread Index (AXI) -- a transparent, transaction-based measure of wholesale bank funding costs -- as a complement to SOFR, summarizing its behavior, construction, and loan-pricing implications. AXI aggregates observable unsecured funding transactions across short- and long…
Viktor Tsyrennikov
arXiv · arXiv q-fin · 2014
In this paper, optimal consumption and investment decisions are studied for an investor who can invest in a fixed interest rate bank account and a stock whose price is a log normal diffusion. We present the method of the HJB equation in order to explicitly solve problems of this type with modifications such as a fixed percentage transaction cost and a mandatory bequest function. It is shown that the investor treats t…
Jiacheng Feng