Riding the Yield Curve: Risk Taking Behavior in a Low Interest Rate Environment

2020 ◽  
Author(s):  
Ralph Chami ◽  
Thomas Cosimano ◽  
Céline Rochon ◽  
Julieta Yung
Keyword(s):  
Interest Rate ◽  
Risk Taking ◽  
Yield Curve ◽  
Rate Environment ◽  
Risk Taking Behavior

scholarly journals Riding the Yield Curve

2020 ◽  
Vol 20 (53) ◽  
Author(s):  
Ralph Chami ◽  
Thomas Cosimano ◽  
Celine Rochon ◽  
Julieta Yung
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Risk Taking ◽  
Yield Curve ◽  
Interest Rate Risk ◽  
Risk Capital ◽  
Hedging Strategies ◽  
Rate Risk ◽  
Rate Environment ◽  
Changes In Risk

Investors seek to hedge against interest rate risk by taking long or short positions on bonds of different maturities. We study changes in risk taking behavior in a low interest rate environment by estimating a market stochastic discount factor that is non-linear and therefore consistent with the empirical properties of cashflow valuations identified in the literature. We provide evidence that non-linearities arise from hedging strategies of investors exposed to interest rate risk. Capital losses are amplified when interest rates increase and risk averse investors have taken positions on instruments with longer maturity, expecting instead interest rates to revert back to their historical average.

scholarly journals The Effect of Funding Liquidity on Risk Taking Behaviour of Conventional Banks

2020 ◽  
Vol 24 (1) ◽  
pp. 139
Author(s):  
Susy Muchtar, Nur Mariana Samosir
Keyword(s):  
Interest Rate ◽  
Gross Domestic Product ◽  
Risk Taking ◽  
Stock Exchange ◽  
Control Variable ◽  
Sampling Technique ◽  
Domestic Product ◽  
Funding Liquidity ◽  
Risk Taking Behavior ◽  
Conventional Banks

This Research aims to determine the effect of funding liquidity on risk taking behaviour. Sample used was 36 conventional banks listed on Indonesia Stock Exchange in the period 2014-2018. The sampling technique used was purposive sampling and the method analysis was panel data regression. The independent variable are funding liquidity measured by deposits, loan and size, and the control variable are gross domestic product, interest rate and unemployee, and the dependent variable are risk taking behavior. The results showed that deposits and loan has negative effect on risk taking behavior. Size, gross domestic product, interest rate and unemployee has no effect on risk taking behavior. The results of this research are expected to be the reference for companies to see the factors that influence risk taking behavior.

scholarly journals Loan Loss Provision and Risk-Taking Behavior of Commercial Banks in Pakistan: A Dynamic GMM Approach

2019 ◽  
Vol 11 (19) ◽  
pp. 5209 ◽  
Author(s):  
Changjun Zheng ◽  
Shumaila Meer Perhiar ◽  
Naeem Gul Gilal ◽  
Faheem Gul Gilal
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Risk Taking ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Loan Loss ◽  
Loan Loss Provision ◽  
Capital Adequacy Ratio ◽  
Risk Taking Behavior

The paper analyzes the determinants of the loan loss provision (LLP) of 22 commercial banks in Pakistan from 2010 to 2017. The motive of the research is that LLP is a measure of credit risk as a proxy for bank risk-taking behavior profits and banks’ sustainability. Especially after the occurrence of a global financial crisis. The quantitative research method of data collection from Bureau Van Dijk’s BankFocus portal and the World Bank’s World Development Indicators. Other than considering specific bank variables such as capital adequacy ratio, return on average equity, and government securities, the effects of macroeconomic variable inflation and lending interest rates are explicitly studied. The model of pooled ordinary least squares (POLS), fixed effect (FE), panel corrected standard error (PCSE), and panel data estimation in the form of a general method of moments (GMM) two-step system is used to find the risk-taking behavior of banks in Pakistan. The results obtained by the use of inflation (INF) as an instrumental variable of LLP are highly dependable with a negative impact on loan loss provision. Lending interest rate (LIR) has a positive and significant relationship with LLP and contribute in the study of macroeconomic variables for bank risk-taking, excessive amount of interest rate was not beneficial for banks to earn profits especially during the economic crises. Return on average equity (ROAE) significantly moderates LLP with a negative interaction and helped the bank with profitable operations and save bank from solvency. Capital adequacy ratio (CAR) and government securities (GOV) are insignificant to LLP. The result is robust by measure of endogeneity, and highlights the important role of commercial banks’ sustainability to explain risk-taking behavior in Pakistan with the intention to increase profits after the occurrence of financial crises. The study further contributes to future research on managerial policy and decision making. In summary, the paper on loan loss provision has the capacity to forecast commercial banks’ credit risk for risk-taking in an emerging country.

scholarly journals The Effect of Digital Unsecured Loans and DTI Ratio on Risk-Taking Behavior

2019 ◽  
Vol 5 (2) ◽  
pp. 133-136
Author(s):  
Fachmi Pachlevi ◽  
Sopacua, Ivana Oktarina
Keyword(s):  
Interest Rate ◽  
Factorial Design ◽  
Internal Control ◽  
Risk Taking ◽  
High Interest Rate ◽  
High Interest ◽  
Increased Risk ◽  
P2p Lending ◽  
Changes In Risk ◽  
Risk Taking Behavior

The objective of this study was to examined the effect of digital unsecured loans and DTI ratio on changes in risk-taking behavior of the household sectros. Increasing of P2P lending is clearly unstoppable in Indonesia. Digital unsecured loans success to simplify credit process, because online-based credit aplication. However, these simply process are followed by high-interest rate. Many people apply for credit without considering risk. The convenience of digital unsecured loans making people forget about high annual percentage rate. Finally, occur increase potential bad loans in the household sectros. Collection of data was carried out through experiments 2 x 2 factorial design. The results shows that digital unsecured loans increases risk-taking behavior of household sectors. DTI ratio also can be used as an internal control of household sectors to prevent increased risk-taking behavior

Predicting Stock Market Performance

2020 ◽  
pp. 1-10
Author(s):  
Thomas Plieger ◽  
Thomas Grünhage ◽  
Éilish Duke ◽  
Martin Reuter
Keyword(s):  
Stock Market ◽  
Risk Taking ◽  
Life Stress ◽  
Price Volatility ◽  
Individual Characteristics ◽  
Self Report ◽  
Financial Behavior ◽  
Market Simulation ◽  
Stock Market Performance ◽  
Risk Taking Behavior

Abstract. Gender and personality traits influence risk proneness in the context of financial decisions. However, most studies on this topic have relied on either self-report data or on artificial measures of financial risk-taking behavior. Our study aimed to identify relevant trading behaviors and personal characteristics related to trading success. N = 108 Caucasians took part in a three-week stock market simulation paradigm, in which they traded shares of eight fictional companies that differed in issue price, volatility, and outcome. Participants also completed questionnaires measuring personality, risk-taking behavior, and life stress. Our model showed that being male and scoring high on self-directedness led to more risky financial behavior, which in turn positively predicted success in the stock market simulation. The total model explained 39% of the variance in trading success, indicating a role for other factors in influencing trading behavior. Future studies should try to enrich our model to get a more accurate impression of the associations between individual characteristics and financially successful behavior in context of stock trading.

Risk-Taking Behavior Associated With Affective States

2014 ◽  
Author(s):  
Ari B. Deutsch ◽  
Michael Koren ◽  
Rachel Moody
Keyword(s):  
Risk Taking ◽  
Affective States ◽  
Risk Taking Behavior

Differences in Risk-Taking Behavior Between Insured and Uninsured Rural Patients

2012 ◽  
Author(s):  
K. Bryant Smalley ◽  
Jacob C. Warren ◽  
Lisa Watson-Johnson ◽  
Nikki Barefoot ◽  
Sean Fowler
Keyword(s):  
Risk Taking ◽  
Risk Taking Behavior ◽  
Rural Patients
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