Optimization of Credit Activity of a Commercial Bank Based on a Parametric Model

In the past few decades, a line of research focusing on the financial portfolios of banking structures has been actively developed in the world’s economic science. The interest in deposit-and-loan portfolios is caused by the rapid growth of both the banking sector and the entire capital market in the world. This paper presents empirical research in the field of analysis of the credit and investment activities of a commercial bank with an extended set of criteria. The team of authors considered a certain approach to parametric modelling of the optimal banking portfolio taking into account unregulated exogenous (macroeconomic) and endogenous (set by the bank) parameters that affect its structure and composition. As part of the proposed method, a list of monitored parameters of the banking portfolio, which was developed due to financial stability and reliability indicators, was compiled. Accordingly, based on calculations with a modified parametric model and assessment of the level of their financial stability and reliability, shortcomings in the structure and composition of the portfolios of the banking organizations under research were identified with respect to the rationality of resource allocation and the adequacy of equity capital. Thus, it was concluded that taking into account the criteria for managing the banking portfolio, measures of profitability and risk, as well as the reliability of the financial and economic base and financial stability of the bank contributes to the growth of its rating and client base, which is especially important for universal commercial banks. Received: 4 September 2021 / Accepted: 22 November 2021 / Published: 3 January 2022

Stock Market Volatility

Researchers examine stock volatility in emerging (E7) nations prior to and during COVID-19 announcements using multiple volatility estimations. The correlation coefficient matrix indicates that there is a strong positive correlation between the specified volatility estimators in the pre-COVID-19 and post-COVID-19 periods. Rogers-Satchell standard deviation has the first rank, and Garman-Klass has the last position in the pre-post-COVID-19 analysis volatility estimators. However, the authors discover a considerable influence of pre-post COVID-19 on the world's E7 countries. The findings' primary implication is that post-COVID-19 volatility is greater than pre-COVID-19 volatility. This means that investors' financial portfolios should be rebalanced to favor industries that are less impacted by COVID-19. Additionally, it serves as an early warning signal for investors and the government to take preventative measures in the event that it occurs again in the future.

Crowds, Lending, Machine, and Bias

Can machines outperform crowds in financial lending decisions? Using data from a crowd-lending platform, we show that, compared with portfolios created by crowds, a reasonably sophisticated machine can construct financial portfolios that provide better returns while controlling for risk. Further, we find that the machine-created portfolios benefit not only the lenders, but also the borrowers. Borrowers receive loans at a much lower interest rate as the machine can weed out the riskiest loans better than the crowds. We also find suggestive evidence of algorithmic bias in machine decisions. We find that, compared with women, men are more likely to receive loans by machine. We propose a general and effective “debiasing” method that can be applied to any prediction-focused machine learning (ML) applications. We show that the debiased ML algorithm, which suffers from lower prediction accuracy, still improves the crowd’s investment decisions in our context. Our results indicate that ML can help crowd-lending platforms better fulfill the promise of providing access to financial resources to otherwise underserved individuals and ensure fairness in the allocation of these resources.

Did Brexit change asset co-movements?

Purpose This paper aims to examine the impact of the Brexit referendum on the risk structure of financial asset prices. Co-movements are analysed using daily price returns of major stock and bond indices as well as commodities and exchange rates from June 2014 to June 2018. The authors used a multivariate GARCH model to study the dynamics of the conditional correlation matrix of asset returns. It was found that the conditional variances and correlations of assets spike on and after the Brexit referendum and then quickly revert to normal levels, suggesting that the effect of the referendum was transient rather than structural. The findings are of interest to investors as co-movements of financial assets can significantly impact financial portfolios and hedging strategies. Design/methodology/approach The authors used a multivariate GARCH model to study the dynamics of the conditional correlation matrix of asset returns. Findings It was found that the conditional variances and correlations of assets spike on and after the Brexit referendum and then quickly revert to normal levels, suggesting that the effect of the referendum was transient rather than structural. Research limitations/implications The findings are of interest to investors as co-movements of financial assets can significantly impact financial portfolios and hedging strategies. Originality/value To the best of the authors’ knowledge, research studying the underlying asset co-movements around Brexit does not exist.

Menciptakan Nilai melalui Program Literasi Keuangan: Portofolio Keuangan Pribadi

Abstrak : Ada kebutuhan terkait dengan literasi keuangan khususnya kemampuan memiliki portofolio yang ideal bagi siswa/i SCB kelas 12. Program pengabdian masyarakat ini merupakan bagian dari program terintegrasi Program studi Akuntansi Universitas Ciputra Surabaya yang meliputi aspek pengajaran, riset dan pengabdian masyarakat. Tema program adalah “Creating Value Through Financial Literacy Programs”. Pelaksanaan dilakukan di Sekolah Citra Berkat (SCB) Surabaya dimana pesertanya yang mengikuti adalah kelas 12. Siswa/i SCB mendapatkan manfaat terkait dengan pengetahuan dan keterampilan khusus tentang teknik menyusun portofolio keuangan pribadi melalui kelas intensif selama 6 kali pertemuan. Upaya ini merupakan bagian dari usaha membangun kecerdasan finansial generasi muda. Dengan membangun kecerdasan finansial, generasi muda akan mampu meningkatkan kualitas hidupnya khususnya untuk pengambilan keputusan-keputusan yang memiliki konsekuensi keuangan. Tahapan pelaksanaan didesain secara bertahap mulai dari tataran materi, praktik hingga pendampingan melalui mentoring untuk memastikan tujuan program tercapai. Dari hasil mengikuti program, siswa/i mendapatkan pengetahuan dan keterampilan untuk merumuskan tujuan keuangan pribadinya, menyusun rancangan portofolionya, merancang strategi keuangan untuk mewujudkan tujuan keuangan tersebut serta mampu mengevaluasi capaian portofolio keuangan pribadinya. Kata Kunci: literasi keuangan, portofolio keuangan pribadi, pengelolaan keuangan, sikap keuangan Abstract : There is a need related to financial literacy, especially the ability to have an ideal portfolio for grade 12 SCB students. This community service program is part of the integrated program of the Accounting Study Program, Universitas Ciputra Surabaya which includes aspects of teaching, research and community service. The program theme was "Creating Value Through Financial Literacy Programs". The implementation was carried out at Citra Berkat School (SCB) Surabaya where the participants were grade 12. SCB students got benefits related to specific knowledge and skills about techniques for compiling personal financial portfolios through intensive classes for 6 meetings. This effort is part of building the financial intelligence of the younger generation. By building this financial intelligence, the younger generation will be able to improve their quality of life, especially for decisions that have financial consequences. The implementation stages are designed in stages starting from the level of material, practice to mentoring through mentoring to ensure program objectives are achieved. From the results of following the program, students gain knowledge and skills to formulate their personal financial goals, draft their portfolio designs, design financial strategies to realize these financial goals and be able to evaluate the achievements of their personal financial portfolios. Keywords: financial literacy, personal financial portfolio, financial management, financial attitude

Selecting Portfolios Directly Using Recurrent Reinforcement Learning (Student Abstract)

Portfolio selection has attracted increasing attention in machine learning and AI communities recently. Existing portfolio selection using recurrent reinforcement learning (RRL) heavily relies on single asset trading system to heuristically obtain the portfolio weights. In this paper, we propose a novel method, the direct portfolio selection using recurrent reinforcement learning (DPS-RRL), to select portfolios directly. Instead of trading single asset one by one to obtain portfolio weights, our method learns to quantify the asset allocation weight directly via optimizing the Sharpe ratio of financial portfolios. We empirically demonstrate the effectiveness of our method, which is able to outperform state-of-the-art portfolio selection methods.