The Model to Construct the Banks' Quota According to Financial Indexes
Date Issued
2004
Date
2004
Author(s)
Wang, Chih-Fang
DOI
zh-TW
Abstract
After the principal of “liberalizing for business but tightening for financial control” being made by the supervision institutinos which aims at participating in WTO, the free-up has resulted in increasingly adding derivative financial products; at the end of 2003, the accumulated volume of derivative products in domestic banking businesses has reached NT$4.07 trillion. Due to the fact that banking businesses become much more aggressive in reaching out financial investment, it becomes even more important as to set up the counterparty trading limit out of the general credit line. On the other hand, the Basel II agreements regulate the way that the financial institutions should reserve the risky assets when trading on the derivative products, it also regulates to set up the total credit line of the counterparties, as well as to monitor the differences between the real risky limit and the original set-up risky limit. Hence, this paper is focusing on applying these theories into practice to help solve for a much better financial-healthy business environment, and greet for a sounder and more liberalized future.
This paper is divided in four parts. The first part is to rate various financial indexes, and the ratings will therefore be linked to the group standards of credit risk of the clients. First of all, we have to set up the rating system of our clients; through unilateral regression (the choosing of variables) and mutilteral regression (the determination of explainable and related variables), we will find out the explainable financial variables, and thus build up the model.
The second part is to cross calculate the credit rating result and the client’s net worth, thus gives the counterparty a limit line, which determines the risk limit of both sides. The total limit line for counterparty is also subject to the limitation of assets as well as the risky nature of credit line.
The third part is to calculate the risk measures of different financial products, which are divided by the traditional products such as general mortgage、 interbank loan、 RP and the derivative products such as Interest Rate Option and FX Option, all the potential financial losses of all the financial products should be measured carefully.
In the fourth part we deal with the counterparty’s limit line which is derived from the above three parts. A explosure of each financial product will be calculated by risky coefficient, when a deal is done, the explosure will be reasonably deducted from counterparty’s limit line. This will help to find out the possible default during the existing time of financial contracts, thus help to accomplish the ultimate goal as to manage the counterparty risk.
Subjects
信用風險限額
財務指標
單變量分析
衍生性金融商品
多變量分析
暴險額
交易對手的風險
credit line
derivative
financial indexes
counterparty risk
mutilteral regression
unilateral regression
explosure
Type
thesis
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