Corporate Probability of Default(PD)Modelling for Banks in Emerging Economies:A Case Study of Zimbabwe Stock Exchange(ZSE)Listed Counters

The paper extends Merton’s Probability of Default(PD)model to the case for transaction costs or market friction for estimation of the PDs of listed banking corporations.A closed form formula for the PD model is obtained and validated using financial data drawn from banks listed on the Zimbabwe Stock Exchange(ZSE).It has been observed that most corporations in emerging economies have been finding it extremely difficult to list,continue listed or manage risk emanating from credit exposures undertaken.In the absence of risk the role of the financial sector of an economy to efficiently and effectively allocate resources between the public and private sectors would be simplified,economically and rationally determined.Reliable or precise computation of the Probability of Default(PD)of a borrower is one of the most critical tasks in credit risk management for commercial banks that were applying the Internal Rating Based Approach(IRBA)under the Basel Capital Accords Ⅱ and Ⅲ frameworks.The study sought to develop a Probability of Default(PD)model that banking corporations in emerging economies such as Zimbabwe could adopt and implement in the Multiple Currency System(MCS)in their desire to grow and develop through their lending businesses.The research study adopted a PD model similar to the Asset Valuation Model(AVM)by Merton(1974)and initially extended by Black-Scholes(1973)and Crouhy et al.(2000)and applied it on a basket of Zimbabwe Stock Exchange listed counters after having adjusted the model for the transaction cost variable.The study therefore succeeded in coming up with a PD model that was worth adopting and implementing by Zimbabwe Stock Exchange(ZSE)listed corporations in their desire to grow towards sustainable development.It was realised that a contemporary PD model adjusted for transaction cost is pertinent for reflection of practical conditions banks face in estimation of their risk metrics such as PD.Transaction costs faced by banks in emerging economies are very huge that they cannot be assumed to be insignificant when it comes to valuation of PDs of banking corporations.The inclusion of transaction costs in estimation of PDs of ZSE listed banks is likely to create a paradigm shift in financial theory on risk metrics in the modern world.The study ends by recommending the need for all Zimbabwean listed corporations to adopt and implement an AVM adjusted for transaction costs if they were to successfully measure and manage both their investment and credit exposure endeavours in the multiple currency system period.

Econometric Model to Estimate the Probability of Default and Loss Given Default in the EBA Stress Test in 2016

In this research,an econometric with panel data using Ordinary least squares OLS model is constructed following the guidelines recommended by the EBA stress test methodology for 2016.The findings indicate that macroeconomic factors affecting defaults are the expected ones in the Spanish credit institutions.However,loan impairments do not follow the patterns that a priori would be normal.Divergent is outcomes in defaults and impairments:the Non-Performing Loans(NPL)is pro-cyclical and impairment losses are counter-cyclical.

No-Arbitrage in Financial Economics: Solution of the Mystery of Implied Volatility and S&P 500 Volatility Index

We have shown that classic works of Modigliani and Miller, Black and Scholes, Merton, Black and Cox, and Leland making the foundation of the modern asset pricing theory, are wrong due to misinterpretation of no arbitrage as the martingale no-arbitrage principle. This error explains appearance of the geometric Brownian model (GBM) for description of the firm value and other long-term assets considering the firm and its assets as self-financing portfolios with symmetric return distributions. It contradicts the empirical observations that returns on firms, stocks, and bonds are skewed. On the other side, the settings of the asset valuation problems, taking into account the default line and business securing expenses, BSEs, generate skewed return distributions for the firm and its securities. The Extended Merton model (EMM), taking into account BSEs and the default line, shows that the no-arbitrage principle should be understood as the non-martingale no arbitrage, when for sufficiently long periods both the predictable part of returns and the mean of the stochastic part of returns occur negative, and the value of the return deficit depends on time and the states of the firm and market. The EMM findings explain the problems with the S&P 500 VIX, the strange behavior of variance and skewness of stock returns before and after the crisis of 1987, etc.

主动队列管理中的APD和APID控制器的设计

AQM策略作为终端系统上网络拥塞控制的一种补充,能在保证较高吞吐量的基础上有效地控制队列长度,从而实现控制端到端的时延,保证QoS。理论上,很多AQM机制可以最终归结为PID控制器。因此在研究PD和PID控制器模型的基础上,设计了两种新的适应性控制机制,即APD和APID控制器,使系统在网络变化的情况下能提高其稳定性和网络性能,并仿真验证了这两种新算法的稳定性和网络性能。

基于APDL的空气弹簧可靠性分析

应用ANSYS软件中的APDL参数化语言,建立了包含SHELL181单元和SHELL93单元的空气弹簧有限元模型.然后,根据滑动接触状态的特点,建立了定义接触单元后的有限元模型.基于ANSYS软件中的PDS模块对空气弹簧进行概率有限元可靠性分析,得到了空气弹簧最大应力(MAXSTR)和极限状态函数(DELTS)的均值、方差以及灵敏度.通过对灵敏性的分析表明:当空气弹簧曲囊橡胶材料的许用极限强度SIGMA越大时且z方向弹性模量越小时结构也越可靠.

地面中重频PD雷达探测巡航导弹性能分析

为了提高对低空小目标,尤其是对巡航导弹的探测能力,地面对空情报雷达已采用中重频PD体制。文章简要分析了地面雷达采用中重频PD体制杂波重叠、距离-多普勒盲区等问题,重点对巡航导弹探测性能进行了仿真分析。仿真结果表明,在距离较近的强杂波干扰环境中采用中重频PD体制对巡航导弹具有较强的探测能力。

基于PDS的铁路信号冗余结构危险失效概率计算方法

在铁路信号领域的安全评估中常采用IEC61508中的方法计算产品的每小时危险失效概率(Probability of a Dangerous Failure Per Hour,PFH),但该方法所面向的工业控制系统同铁路信号地面控制系统间存在差异性,且计算过程针对共因失效的分析较少。采用PDS(挪威语缩写,代表安全仪表系统的可靠性)方法定量计算铁路信号冗余结构的PFH,首先分析铁路信号系统典型的3种冗余结构,然后通过引入结构修正因子CMOON改进β参数模型,以区分共因失效对不同冗余结构PFH影响的不同,接着根据3种冗余结构的工作特点构建系统可靠性框图,并给出不同冗余结构通用的PFH计算公式,最后以实验数据进行仿真,结果显示,与采用IEC61508中的方法相比,本文的方法更加注重共因失效对PFH的影响程度,符合现场设备的实际使用情况。

Effect of Corporate Debt on Firm Value

We have shown that three classic works considering the effects of corporate debt on the firm value,namely,Modigliani and Miller(1958,1963),Merton(1974),and Leland(1994),are wrong.Their main mistake is ignoring the business security expenses,BSEs.We suggest the model taking account of BSEs and apply it to the analysis of debt influence on the firm value and survival.Our modeling demonstrates that(1)the debt affects the firm value and its survival,(2)this influence is negative,diminishing the firm value and its chances to survive,(3)the pressure of the negative effect of debt increases as the debt grows,provoking the firm default.The debt can be beneficial for the firm if the loan is taken to improve its technology.The model helps estimate the chances to succeed in the technological modernization for various parameters of the firm and its business environment;and by that,to find the technology most suitable for the firm.It is shown that there is a serious problem in reading the market signals concerning a firm and using this information to control this firm.

Different Methods to Estimating the Cost of Equity: An Analysis on a Sample of Too Big to Fail Banks

In this study, a comparison was made between the Capital Asset Pricing Model (CAPM), the most widely used methodology, and an actuarial method with the use of credit default swaps (CDSs) and the method based on the inverse of the multiple P/E. These three models are used to estimate the cost of equity. The comparison was made on a sample of 24 banks selected among the largest for assets in the world (too big to fail banks) belonging to 11 different countries. The results show that the CAPM estimates a premium for the higher risk than the one obtained with the actuarial method and the method based on the inverse of the P/E (except for 2013).

Some Financial Problems in the Light of EMM Results:Asset Pricing and Efficient Portfolio Allocation

Discussing results in asset pricing and efficient portfolio allocation,we show that mixed success and errors in these results often follow from a lack of information about the asset return distribution and wrong assumptions about its properties.Some mistakes in asset pricing come from the assumption of symmetry in return distributions.Some errors in efficient portfolio allocation follow from Markowitz’s approach when applying it to portfolio optimization of skewed asset returns.The Extended Merton model(EMM),generating skewed return distributions,demonstrates that(i)in skewed asset returns,the variance is not an adequate measure of risks and(ii)positive skewness in the asset returns comes together with a high default probability.Thus,the maximization of the mean portfolio returns and skewness with controlled variance used in mainstream papers can critically increase portfolio risks.We present the new settings of the optimal portfolio allocation problem leading to less risky efficient portfolios than the solutions suggested in all previous papers.

Dynamics of Phenol Degrading-Iron Reducing Bacteria in Intensive Rice Cropping System

Field and greenhouse experiments were conducted to investigate the effects of cropping season, nitrogen fertilizer input and aerated fallow on the dynamics of phenol degradihg-iron reducing bacteria (PD-IRB) in tropical irrigated rice (Oryza sativa L.) systems. The PD-IRB population density was monitored at different stages of rice growth in two cropping seasons (dry and early wet) in a continuous annual triple rice cropping system under irrigated condition. In this system, the high nitrogen input (195 and 135 kg N ha-1 in dry and wet seasons, respectively) plots and control plots receiving no N fertilizer were compared to investigate the effect of nitrogen rate on population size. The phenol degrading-iron reducing bacteria (PD-IRB) were abundant in soils under cropping systems of tropical irrigated rice. However, density of the bacterial populations varied with rice growth stages. Cropping seasons, rhizosphere, and aerated fallow could affect the dynamics of PD-IRB. In the field trial, viable counts of PD-IRB in the topsoil layer (15 cm) ranged between 102 and 108 cells per gram of dry soil, A steep increase in viable counts during the second half of the cropping season suggested that the population density of PD-IRB increased at advanced crop-growth stages. Population growth of PD-IRB was accelerated during the dry season compared to the wet season. In the greenhouse experiment, the adjacent aerated fallow revealed 1-2 orders of magnitude higher in most probable number (MPN) of PD-IRB than the wet fallow treated plots. As a prominent group Of Fe reducing bacteria, PD-IRB predominated in the rhizosphere of rice, since maximum MPN of PD-IRB (2.62×108 g-1 soil) was found in rhizosphere soil. Mineral N fertilizer rates showed no significant effect on PD-IRB population density.

东北地区基层央行视角下的地方政府债务风险评估研究——基于GM模型及KMV模型的实证分析

近年来,我国各地方政府为了促进地方经济快速发展和居民生活质量提升,不断加大对市政设施、医疗卫生及教育等基础设施的建设力度,随之而来的则是地方政府债务规模大幅度提升。本文以辽源地区数据为例,基于GM模型及KMV模型对已知的公开数据进行分析,预测辽源市2023年-2025年财政收入Qt,在假设的偿还比例Bt/Rt条件下带入波动率σ及增长率g计算辽源市2023年-2025年的违约距离DD和违约概率p,并提出规避地方政府债务风险的对策建议。

我国地方政府债务风险测度、区域差距及分布动态

利用地方政府债券的信用利差、债券利率等数据,基于无套利法的原理,可计算出全国31个省份在2015—2020年的违约概率,再利用Dagum基尼系数及分解方法和核密度估计法对地方政府债务风险的地区差距进行实证分析。研究结果表明:2015—2020年间,我国地方政府债务风险总体上呈现倒U型的变化趋势,各区域债务风险差距逐渐缩小,同时,地方政府债务风险区域差异主要来源于区域间债务风险交叉重叠的影响。东部区域内部各个省份间的债务风险差距波动最大,中部差距逐渐缩小,西部差距则基本不变。结论既反映出财政分权、官员晋升激励、城镇化、预算软约束、土地财政和税收的作用结果以及区域协调、要素流动的影响,也体现出区域间的风险溢出效应较大以及债券定价和配置上的不合理性。政策上,在国内大循环视角下要重视不同区域内和区域间债务风险差距的特征,促进政府债券市场化定价,对欠发达地区增加债务额度的配置,同时加强不同区域间的协同治理。

Research on Credit Default Swaps Pricing Considering Moral Hazard Incentive under Reduce-Form Model

Equilibrium pricing of credit default swaps(CDS)promotes efficient identification of credit risk in the market,which in turn leads to efficient allocation of resources.However,even when CDS have been priced in equilibrium,i.e.,when premiums are equal to anticipated payments,the moral hazard incentives of CDS buyers increase with CDS transactions.Consequentially,it becomes an interesting research direction to study the impact of moral hazard incentives on the trading mechanism or pricing of derivatives(CDS).Most of the existing literature on the impact of moral hazard incentives in CDS pricing on derivatives trading mechanisms takes a macro perspective and focuses on the agreement risk effect.The literature exploring the analysis of the impact of moral hazard on the probability of agreement default from a micro perspective is not yet available.With this in mind,this paper focuses on the mechanisms by which“fraud”,an extreme manifestation of micro-moral hazard incentives,affects the probability of default.This paper introduces for the first time the concept of“claiming fraud”by credit protection buyers,which is different from the macro perspective of moral hazard incentives,and thus defines a specific extreme form of moral hazard incentives.Meanwhile,to address the intrinsic feature of the lack of economic explanatory power of the reduce-form model,this paper introduces a moral hazard incentive factor into the reduce-form model,and proposes a moral hazard state variable as a function of the asset value of the reference entity,which gives the reduce-form model strong economic explanatory power,and the default predictability is reduced by the description of the reduce-form model.In terms of the object of study,this paper considers the issue of moral hazard incentives in the presence of claiming fraud in two reference entities to further explore the impact of moral hazard incentives on default protection at the micro level in terms of cyclic default.Finally,based on the analysis of the results of the numerical simulation experiments,it is proposed that increasing the number of reference assets for CDS buyers will help to reduce the moral hazard incentives of the buyer,and thus the anticipated payments to the buyer,i.e.,we attempt to endogenize the credit risk of an asset by allowing the asset holder to choose the probability of the asset going up or down,which helps to understand the phenomenon of moral hazard incentives in CDS trading.

Credit Spreads,Probability of Default and Debt Risk Measurement of Prefectural Governments in China:2014-2017

In this paper,the concepts of probability of default,loss given default and expected loss in the internal ratings-based approach are introduced into the measurement of local government debt risk.Based on issuing interest rate and credit spreads of provincial government bonds,the default probability models of general debt and special debt are constructed and estimated,and the general and special debt risk of 333 prefectural governments in China from 2014 to 2017 are estimated respectively,and their regional distribution and changes are analyzed.The conclusions are as follows:Both general and special debt risk are different among regions.In terms of vertical changes in 2014-2017,debt risk has increased on the whole,but this increase has been driven more by the increase in the size of the debt,with no significant change in the probability of default,and the debt risk is concentrated in a small number of prefectural governments.The general debt risk accounts for about two-thirds of the total debt risk,the special debt risk accounts for about one-third,and this proportion structure is basically unchanged in 2014-2017.Based on the above conclusions,this paper puts forward corresponding policy recommendations for governance and control of local debt risk.

信用风险模型比较分析

本文分析了现代信用风险模型迅速发展的主要原因 ,对主要派别的代表性模型用数学语言进行了总结 ,比较分析了各模型的原理及优缺点 ,并简要介绍了各模型的实证效果。