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Title: Perspectives on bank risk
Author: Larkin, Elizabeth
ISNI:       0000 0004 5363 5835
Awarding Body: University of Reading
Current Institution: University of Reading
Date of Award: 2014
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The 2007-9 financial crisis followed exponential growth in bank assets that, together with increasingly cross-border operations, may have exacerbated the later downturn. Observing changes in the financial markets since 1945 using both a chronological and a themed perspective, we find many other financial crises with similar features, together with recurring issues such as short selling and reserve currencies. We show how the Basel minimum capital requirements changed in response to those events. Our conclusion is that crises reflect similar underlying issues which require adaptable methods to ensure the stability of the wider economy. Having reviewed the criteria for aggregating a bank's exposure to credit risk and market risk, we demonstrate an alternative approach. We show theoretical calculations for a share, a bond and a forward and find that regulatory results tend to overestimate the short-term and underestimate the long-term time horizon. Applying this analysis to audited annual financial statements of banks in Europe, U.K and the U.S., selected according to NYU Stern's SRISK measure, we allocate their income into the major banking activities. Factors affecting risk are used in fixed effects panel regressions for each return. We then simulate annual factor returns using GARCH models and forecast bank returns for the following year. We find that our method explains a large proportion of these returns for our sample.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available