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In this paper, we analysed a given liquidity risk model, and tried to replicate and replace it with a new, customised, and internal one. We had to first understand the whole idea behind the risk of liquidity, and what were the legal restrictions around it. Then, we made sure to analyse deeply the actual model, and we replicated it as best as we could, before trying to come up with a new one, that we also tried to implement. In parallel, we analysed other models that, while useless in our situation, were of great help to get a better all-around view of the problem. We further draw conclusions towards our conflicting results regarding the potential implementation of a new model, and its real utility considering its cost. Ce papier a pour but d’analyser un modèle de risque de liquidité existant, et de tenter de le reproduire puis de le remplacer par un nouveau, développé sur mesure et en interne. Tout d’abord, il fallut comprendre l’idée générale se cachant derrière le risque de liquidité, et qu’elles en étaient les contraintes légales. Ensuite, nous avons étudié en détail le modèle existant, afin de le reproduire le plus fidèlement possible, avant de développer un nouveau que nous avons tenté d’implémenter. En parallèle, nous avons analysé d’autres modèles qui, bien qu’inutiles dans notre cas, nous ont étés d’une grande aide dans la compréhension du problème. Enfin, nous tirons des conclusions de nos résultats pour le moins nuances, en ce qui concerne la mise en place potentielle d’un tel modèle, et son utilité vis-à-vis de ses coûts.
bid-ask spread --- bloomberg --- bond --- equity --- fixed income --- liquidation horizon --- liquidity risk --- liquidity --- project thesis --- time to liquidate --- value at risk --- Sciences économiques & de gestion > Finance
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In this thesis, we aim to fill the lack of scientific literature that covers the field of cryptocurrency portfolio management by analyzing the link between the risk profile of a cryptocurrency portfolio and the market provenance of its components. In fact, despite the fact that more and more investors consider cryptocurrencies as a speculative tool, the lack of knowledge that covers this topic still procures a lot of uncertainty. In order to do find an answer to our research question, we firstly define the market provenance of a digital-asset by stating that investors can construct their portfolio from two different types of components: cryptocurrencies traded on a decentralized exchange platform and cryptocurrencies traded on a centralized exchange platform. Through the reviewing of existent literature, we make the emphasis of two key features that will constitute the basis of our hypothesis: (1) decentralized exchange platforms are less liquid than centralized exchange platforms (Barbon and Ranaldo, 2021) and (2) there is a negative correlation between liquidity and expected returns in the cryptocurrency market (Zhang and Li, 2020). By linking these two statements with our research question, we take as a main hypothesis that market provenance effects exist and affect the returns and the risk profile of a portfolio. We aim to verify this hypothesis by conducting the risk-return analysis of two portfolios constructed from two different market provenance: a centralized exchange platform (Binance) and a decentralized exchange platform (Uniswap). In order to have a wider range of results, we follow the work of Mazanec (2021) who studies cryptocurrencies and compares three different portfolio strategies. By extracting the historical data from January 2020 to June 2022, we allocate the weights of the components according the Equally-weighted model and two models following Markowitz’s mean-variance framework: the Maximum Sharpe ratio model and the Minimum Volatility model. To carry out the empirical study, we use the software Python following the work of Lewinson (2020). At the end of this thesis, we confirmed by reviewing the results of our analysis that the market provenance of a digital-asset has an impact on the returns and the risk profile of a portfolio. In fact, our calculations showed that the portfolio exclusively constructed from components bought on a decentralized exchange platform has higher returns and a riskier profile than the portfolio exclusively constructed from components bought on a centralized exchange platform. After positioning our results according existent scientific literature, we found out that despite several differences related to the sample period of the data, the outcomes of our study were relevant and aligned with the methodology of Mazanec (2021) we followed.
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Developing economies can strengthen their financial systems by implementing the main elements of global regulatory reform. But to build an effective prudential framework, they may need to adapt international standards taking into account the sophistication and size of their financial institutions, the relevance of different financial operations in their market, the granularity of information available and the capacity of their supervisors. Under a proportionate application of the Basel standards, smaller institutions with less complex business models would be subject to a simpler regulatory framework that enhances the resilience of the financial sector without generating disproportionate compliance costs. This paper provides guidance on how non-Basel Committee member countries could incorporate banks’ capital and liquidity standards into their framework. It builds on the experience gained by the authors in the course of their work in providing technical assistance on—and assessing compliance with—international standards in banking supervision.
Banks and Banking --- Finance: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- General Financial Markets: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial services law & regulation --- Banking --- Liquidity risk --- Liquidity requirements --- Basel III --- Basel Core Principles --- Banks and banking --- State supervision --- Financial risk management
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Over the past decade or so, most Central and Eastern European countries have reformed their pension systems, significantly downsizing their public pillars and creating private pillars based on capitalization accounts. Early policy attention was focused on the accumulation phase but several countries are now reaching the stage where they need to address the design of the payout phase. This paper reviews the complex policy issues that will confront policymakers in this effort and summarizes recent plans and developments in four countries (Poland, Hungary, Estonia, and Lithuania). The paper concludes by highlighting a number of options that merit detailed consideration.
Bequests --- Capitalization --- Debt Markets --- Finance and Financial Sector Development --- Financial Literacy --- Financial Sector Development --- Fixed Annuities --- Government guarantees --- Inflation --- Insurance & Risk Mitigation --- International Bank --- Investing --- Investment and Investment Climate --- Investment risk --- Liquidity --- Liquidity risk --- Long-term assets --- Macroeconomics and Economic Growth --- Market design --- Pension --- Pension System --- Pension systems --- Pensions & Retirement Systems --- Prudential regulation --- Securities --- Social Protections and Labor --- Solvency --- Variable Annuities
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Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a unique data set containing two million trades, this paper investigates the relationship between holding periods and transaction costs for 66,000 households from a large discount brokerage. The author finds that transaction costs are an important determinant of investors' holding periods, after controlling for household and stock characteristics. The relationship between holding periods and transaction costs is stronger among more sophisticated investors. Households with longer holding periods earn significantly higher returns after amortized transaction costs, and households that have holding periods that are positively related to transaction costs earn both higher gross and net returns. The author shows that there is correlation in the demand for liquid assets across households and, consistent with the notion of flight to liquidity, this demand increases during times of low market liquidity. Households with higher incomes and with higher wealth invested in the stock market supply liquidity when market liquidity is low.
Brokerage --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Equity markets --- Finance and Financial Sector Development --- Holding --- Illiquid securities --- Individual investor --- Individual Investors --- International Bank --- Investment Decisions --- Liquid assets --- Liquidity --- Liquidity premium --- Liquidity risk --- Macroeconomics and Economic Growth --- Market liquidity --- Markets and Market Access --- Mutual Funds --- Private Sector Development --- Return --- Returns --- Stock market --- Stocks --- Trading --- Transaction --- Transaction Costs
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Liquidity and solvency have been called the "heavenly twins" of banking (Goodhart, Charles, 'Liquidity Risk Management', Financial Stability Review - Special Issue on Liquidity, Banque de France, No. 11, February, 2008). Since these "twins" interact in complex ways, it is difficult - particularly at times of crisis - to distinguish between them, especially in the presence of information asymmetries (Information asymmetry occurs when one party has more or better information than the other, creating an imbalance of power, giving rise to adverse selection and moral hazard ). An insolvent bank can be liquid or illiquid, and a solvent bank may be at times illiquid. In the latter case, insolvency is not far away, since banking is grounded in information and confidence, and it is confidence which in the end determines liquidity. In other words, liquidity is very much endogenous, determined by the general condition of a bank, as well as the perception of it by the public and market participants. Dealing with liquidity risk is more challenging than dealing with other risks, since liquidity is the result of all the operations of a bank and it is fundamentally a relative concept which compares segments of the balance sheet on the asset and liability sides. It does not deal with absolutes, like arguably the concept of capital and it explains why there is not an internationally recognized "Liquidity Accord". This Working Paper addresses key concepts like market and funding liquidity and basic tools to address liquidity issues like cash flows, liquidity gaps and some selected financial ratios. It aims at providing an introductory guide to risk assessment and management, and provides useful and practical guidelines to undertake liquidity assessments which could prove useful in preparing Financial Assessment Programs (FSAPS) in member countries of the Bretton Woods institutions.
Balance sheet --- Banking system --- Bankruptcy and Resolution of Financial Distress --- Banks and Banking Reform --- Cash flows --- Central bank --- Currencies and Exchange Rates --- Debt Markets --- Deposits --- Emerging Markets --- Finance and Financial Sector Development --- Financial Stability --- Information asymmetries --- Information asymmetry --- International Bank --- Lender --- Liability --- Liability sides --- Liquidity --- Liquidity Risk --- Market participants --- Maturity --- Moral hazard --- Private Sector Development --- Risk Management --- Solvency --- Withdrawal
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Theoretical papers link the liquidity premium to the optimal trading decisions of investors facing transaction costs. In particular, investors' holding periods determine how transaction costs are amortized and priced in asset returns. Using a unique data set containing two million trades, this paper investigates the relationship between holding periods and transaction costs for 66,000 households from a large discount brokerage. The author finds that transaction costs are an important determinant of investors' holding periods, after controlling for household and stock characteristics. The relationship between holding periods and transaction costs is stronger among more sophisticated investors. Households with longer holding periods earn significantly higher returns after amortized transaction costs, and households that have holding periods that are positively related to transaction costs earn both higher gross and net returns. The author shows that there is correlation in the demand for liquid assets across households and, consistent with the notion of flight to liquidity, this demand increases during times of low market liquidity. Households with higher incomes and with higher wealth invested in the stock market supply liquidity when market liquidity is low.
Brokerage --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Equity markets --- Finance and Financial Sector Development --- Holding --- Illiquid securities --- Individual investor --- Individual Investors --- International Bank --- Investment Decisions --- Liquid assets --- Liquidity --- Liquidity premium --- Liquidity risk --- Macroeconomics and Economic Growth --- Market liquidity --- Markets and Market Access --- Mutual Funds --- Private Sector Development --- Return --- Returns --- Stock market --- Stocks --- Trading --- Transaction --- Transaction Costs
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Hidden behind a number of economic crises in the mid- to late 1990s-including Argentina's headline-grabbing monetary and political upheaval-is that fact that Latin American economies have, generally speaking, improved dramatically in recent years. Their success has been due, in large part, to macroeconomic reforms, and this book brings together prominent economists and policymakers to assess a decade of such policy shifts, highlighting both the many success stories and the areas in which further work is needed. Contributors offer both case studies of individual countries and regional overviews, covering monetary, financial, and fiscal policy. Contributors also work to identify future concerns and erect clear signposts for future reforms. For instance, now that inflation rates have been stabilized, one suggested "second stage" monetary reform would be to focus on reducing rates from high to low single digits. Financial sector reforms, it is suggested, should center on improving regulation and supervision. And, contributors argue, since fiscal stability has already been achieved in most countries, new fiscal reforms need to concentrate on institutionalizing fiscal discipline, improving the efficiency and equity of tax collection, and modifying institutional arrangements to deal with increasingly decentralized federal systems. The analysis and commentary in this volume-authored not only by academic observers but by key Latin American policymakers with decades of firsthand experience-will prove important to anyone with an interest in the future of Latin American's continuing economic development and reform. Contributors to this volume: José Antonio González, Stanford University Anne O. Krueger, International Monetary Fund Vittorio Corbo, Pontifical Catholic University, Chile Klaus Schmidt-Hebbel, Central Bank of Chile Alejandro Werner, Bank of Mexico Márcio G. P. Garcia, Pontifical Catholic University, Rio Tatiana Didier, World Bank Gustavo H. B. Franco, former president, Central Bank of Brazil Francisco Gil Díaz, Minister of the Treasury, Mexico Roberto Zahler, former governor, Central Bank of Chile Ricardo J. Caballero, Massachusetts Institute of Technology Philip L. Brock, University of Washington Stephen Haber, Stanford University Pablo E. Guidotti, Universidad Torcuato Di Tella, Buenos Aires Vito Tanzi, International Monetary Fund Enrique Dávila, Ministry of Finance, Mexico Santiago Levy, Mexican Social Security Institute Ricardo Fenochietto, private consultant, Buenos Aires Rogério L. F. Werneck, Pontifical Catholic University, Rio Carola Pessino, Universidad Torcuato di Tella, Buenos Aires Michael Michaely, Hebrew University of Jerusalem
Monetary policy --- Fiscal policy --- Latin America --- Commercial policy --- latin america, economics, finance, nonfiction, brazil, reform, taxation, government, growth, developing countries, mexico, value added tax, emerging markets, liquidity, risk management, industrial development, banks, chile, financial crisis, liberalization, trade, china syndrome, monetary policy, interest rates, inflation, partial dollarization, exchange rate, international.
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Liquidity and solvency have been called the "heavenly twins" of banking (Goodhart, Charles, 'Liquidity Risk Management', Financial Stability Review - Special Issue on Liquidity, Banque de France, No. 11, February, 2008). Since these "twins" interact in complex ways, it is difficult - particularly at times of crisis - to distinguish between them, especially in the presence of information asymmetries (Information asymmetry occurs when one party has more or better information than the other, creating an imbalance of power, giving rise to adverse selection and moral hazard ). An insolvent bank can be liquid or illiquid, and a solvent bank may be at times illiquid. In the latter case, insolvency is not far away, since banking is grounded in information and confidence, and it is confidence which in the end determines liquidity. In other words, liquidity is very much endogenous, determined by the general condition of a bank, as well as the perception of it by the public and market participants. Dealing with liquidity risk is more challenging than dealing with other risks, since liquidity is the result of all the operations of a bank and it is fundamentally a relative concept which compares segments of the balance sheet on the asset and liability sides. It does not deal with absolutes, like arguably the concept of capital and it explains why there is not an internationally recognized "Liquidity Accord". This Working Paper addresses key concepts like market and funding liquidity and basic tools to address liquidity issues like cash flows, liquidity gaps and some selected financial ratios. It aims at providing an introductory guide to risk assessment and management, and provides useful and practical guidelines to undertake liquidity assessments which could prove useful in preparing Financial Assessment Programs (FSAPS) in member countries of the Bretton Woods institutions.
Balance sheet --- Banking system --- Bankruptcy and Resolution of Financial Distress --- Banks and Banking Reform --- Cash flows --- Central bank --- Currencies and Exchange Rates --- Debt Markets --- Deposits --- Emerging Markets --- Finance and Financial Sector Development --- Financial Stability --- Information asymmetries --- Information asymmetry --- International Bank --- Lender --- Liability --- Liability sides --- Liquidity --- Liquidity Risk --- Market participants --- Maturity --- Moral hazard --- Private Sector Development --- Risk Management --- Solvency --- Withdrawal
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Over the past decade or so, most Central and Eastern European countries have reformed their pension systems, significantly downsizing their public pillars and creating private pillars based on capitalization accounts. Early policy attention was focused on the accumulation phase but several countries are now reaching the stage where they need to address the design of the payout phase. This paper reviews the complex policy issues that will confront policymakers in this effort and summarizes recent plans and developments in four countries (Poland, Hungary, Estonia, and Lithuania). The paper concludes by highlighting a number of options that merit detailed consideration.
Bequests --- Capitalization --- Debt Markets --- Finance and Financial Sector Development --- Financial Literacy --- Financial Sector Development --- Fixed Annuities --- Government guarantees --- Inflation --- Insurance & Risk Mitigation --- International Bank --- Investing --- Investment and Investment Climate --- Investment risk --- Liquidity --- Liquidity risk --- Long-term assets --- Macroeconomics and Economic Growth --- Market design --- Pension --- Pension System --- Pension systems --- Pensions & Retirement Systems --- Prudential regulation --- Securities --- Social Protections and Labor --- Solvency --- Variable Annuities
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