Interest rate volatility and retail interest rate pass-through in the case of the Malaysian economy

2016 ◽  
Vol 50 (5) ◽  
pp. 277-294 ◽  
Author(s):  
Mohammed Nur Hussain ◽  
Bodrun Nahar
Keyword(s):  
Interest Rate ◽  
Interest Rate Volatility ◽  
Pass Through

Evidence of customer sophistication behaviour in deposit markets: the case of Qatar

2020 ◽  
Vol 47 (5) ◽  
pp. 1181-1196
Author(s):  
Noura Abu Asab
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Industry ◽  
Positive Impact ◽  
Monetary Shocks ◽  
Content Type ◽  
Interest Rate Volatility ◽  
Pass Through ◽  
The Interest Rate ◽  
The Impact

PurposeThe paper investigates the interest rate policy transmission mechanism and the role of market structure of the banking industry in Qatar.Design/methodology/approachCompetitiveness indexes are used to measure the degree of market power in the banking industry in Qatar. The momentum threshold autoregressive model is applied over the monthly period from January 2005 to June 2018 to examine the magnitude of intermediation and adjustment to disequilibria in the deposit market. In addition, to model interest rate volatility and overcome the problem of heteroscedastic errors in the error correction standard models, an asymmetric EC-EGARCH-M model is applied.FindingsThe findings suggest incomplete pass-through and asymmetric response to monetary shocks. The asymmetric adjustment mechanism is found to be downward rigid which suggests a high degree of customer sophistication and an elastic supply of deposits. The results of the EC-EGARCH-M show that the impact of monetary policy shocks has a significant positive impact on deposit interest rates and that negative monetary shocks trigger more conditional interest rate volatility in the next period than positive monetary shocks for a short maturity rate.Originality/valueThe paper is the first to highlight the behaviour of the interest rate pass through channel and measures the degree of competitiveness of the banking industry for the case of a small, rich country. In addition, using recent data, the paper applies different econometric methodologies and overcomes the problem of heteroskedastic errors by modelling the interest rate volatility using the EC-EGARCH-M model.

Empirical Evidence of Asymmetric Interest Rate Pass-Through in Vietnam

2013 ◽  
Vol 218 ◽  
pp. 78-93
Author(s):  
NGUYEN KHAC QUOC BAO ◽  
NGUYEN HUU HUY NHUT
Keyword(s):  
Interest Rate ◽  
Empirical Evidence ◽  
Pass Through

scholarly journals HOLDER-EXTENDIBLE EUROPEAN OPTION: CORRECTIONS AND EXTENSIONS

2015 ◽  
Vol 56 (4) ◽  
pp. 359-372 ◽  
Author(s):  
PAVEL V. SHEVCHENKO
Keyword(s):  
Brownian Motion ◽  
Interest Rate ◽  
Real Life ◽  
Option Price ◽  
Geometric Brownian Motion ◽  
Fixed Amount ◽  
Underlying Asset ◽  
Closed Form Solutions ◽  
Pricing Options ◽  
Interest Rate Volatility

Financial contracts with options that allow the holder to extend the contract maturity by paying an additional fixed amount have found many applications in finance. Closed-form solutions for the price of these options have appeared in the literature for the case when the contract for the underlying asset follows a geometric Brownian motion with constant interest rate, volatility and nonnegative dividend yield. In this paper, option price is derived for the case of the underlying asset that follows a geometric Brownian motion with time-dependent drift and volatility, which is more important for real life applications. The option price formulae are derived for the case of a drift that includes nonnegative or negative dividend. The latter yields a solution type that is new to the literature. A negative dividend corresponds to a negative foreign interest rate for foreign exchange options, or storage costs for commodity options. It may also appear in pricing options with transaction costs or real options, where the drift is larger than the interest rate.

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

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