As mentioned above, the funding liquidity mainly refers to the liability part of the asset and the market liquidity concerns the asset side of the balance sheet. In the liability side, the term should be longer because long term liability requires less funding liquidity. The bank need not to roll over the liability to support the demand from the asset side (Shin, 2009). In the asset side, the term should be short because short term asset requires less market liquidity. The short term asset are usually more liquidity because these assets could be transformed to cash in the near future. However, as showing in Table 1, it could be found that Northern Rock has very high liquidity risk. On the liability side, it relies too much on the short term …show more content…
In this subsection, the interest rate risk is examined for the Northern bank. As mentioned above, the Northern Rock relies heavily on the short term liabilities to support its long run asset. The transforming from the short term liability to long run asset is in fact one of the functions for banks. However, too much reliance on the wholesale market finance would expose the bank heavily to the interest rate risk (Llewellyn, 2008). The deposit rate usually are stable over time but the short term liability rate could vary tremendously, especially in the bad times. And Figure 1 gives the annual deposit interest rate. Figure 2 gives the daily interbank interest rate and the official interest rate in UK. Both the time range for these two Figures are from January 1 2000 to January 1 …show more content…
This could be explained using Figure 3. For a portfolio, its returns usually follow a distribution. In the normal distribution case, as seeing in Figure 3, the shadow place refers to the Value at Risk. That is, the returns or the value of the portfolio hit to a critical value of the left tail of the distribution. This critical value is named as the value at risk. Given the confidence level (100-X)%, the losses would not exceed to this critical value. The Value at Risk could be calculated using the following formula (1). In equation (1), V is the portfolio value. In this study, it is assumed as £10,000. Formula (1) is based on the log normal distribution of the stock price which is widely adopted in the empirical and theoretical study. The parameter μ and σ are the expected returns and standard variance. And 1-X is the confidence level. It could be estimated using the historical price. The holding period is assumed to be 250. Thus, the holding period is roughly one year.
VaR=V*[μ+σN^(-1) (X)] (1)
Using the historical data from September 30 1997 to June 30 2007, it could be estimated the average daily return and standard variance for the stock of Northern Rock is 0.024% and 1.705% respectively. Using a holding period of 250, the expected return and the standard deviation is μ=0.024%*250=6.03% and σ=1.705%*√250=26.95%. If the confidence level is 99%,
Northwestern spends too much on recruiting and education to see a majority of its employee leave before they are able to have a full career as a financial advisor. By paying their employees northwestern is able increase employee productivity, increase the employee’s lifespan at the company, which will increase the number of clients northwestern will have as well.
Mr. Flint’s comments were discussing what could happen during collective bargaining with employees’ pay and benefits, which is his opinion. Moreover, David Walsh writes, “Employers can make predictions about the likely consequences that unionization will have for the business—consequences that are objectively because of economic reality that is beyond the employer’s control.” (Walsh, 2013-2016, pg. 511) However, Mr. Flint’s comments were discussing a decrease in pay and less benefits, which could be construed as a threat.
Earlier 2002, the stock price of Agnico-Eagle Mines sharply decreased by $1 finally closed at $13.89. This price has reached one of the lowest level, from the company's historical perspective. As a professional equity portfolio manager, who has a large number of AEM stocks on hand. Acker and his team are necessary to find a proper way to estimated the fair value of AEM as well as its equity. Discounted Cash Flow (DCF) has been chosen to do this job. The theory behind DCF valuation approach is that the firm's value can be estimated by using the expected future free cash flow discounted by an appropriate discounted rate (Koller etc 2005). However several assumptions need to be clearly examined within this approach. The following sections are showing the process of DCF step by step.
In order to analyze Ally, I will be evaluating its balance sheet and performance ratios over the period from June 2006 to June 2013. This will show the progression of the bank throughout the 2008-2009 financial crisis. I will compare Ally’s financial data to the whole US banking industry as a way to analyze the banks risk and performance over that period. Factors such as profitability, credit risk, capital adequacy, liquidity risk, interest rate risk, market risk, ad off balance sheet exposures will all be evaluated.
Even though most of us may not realized it, interest rate actually play an important role in our everyday lives due to its great effect on the buying power. For instances, if the interest rate is higher, people tend to reduce their spending and rather save it in the deposit account due to the large interest that they can gained. However, if the interest rate is lower, they rather spend it than keeping it in the deposit account. The reason for this is because the ups and down of the interest rates have a significant impact on their personal income. Furthermore, since interest rate have a major impact on investment it is important for the investors to keep track on these interest rate’s trend before making any decision.
The objective of paying our employees is to increase employee satisfaction and loyalty. Northwestern sends too much on recruiting and education to see a majority of its employee leave before they are able to have a full career as a financial advisor. By paying their employees northwestern is able increase employee productivity, increase the employee’s lifespan at the company, which will increase the number of clients northwestern will have as well.
Considering the importance of this, Yale’s investment Committee reviewed its portfolio at least once a year. In order to decide the target allocation, the organization performed a mean-variance analysis of the expected returns and risks and compared them with those of past Yale allocations and the current mean allocation of other universities. Moreover, the organization also examined the long-run implications of its allocation for the downside risk to the
Over the previous five years, the return of the ProIndex fund have outperformed the S&P 500 index, as the 5-year-return is nearly 3 times than the benchmark and the annualised return is nearly 2 times than the benchmark. It means ProIndex fund has a significant increase in value within that period. However, the ProIndex Fund has a higher standard deviation which means it is more risk than the S&P 500 index. Especially for the annualised standard deviation, it is approximately 10% higher than the benchmark. The correlation coefficient between the ProIndex and benchmark is about 0.65 which means both two variables are positive changing consistently, but there are still some other factors which have impacts on the relationship between two variables as the correlation is less than 1. Furthermore, the higher beta, 1.0132, which is more than 1 and it may be one of the reasons for high risk as well since it is more sensitive to the market change. It means that the ProIndex fund would increase by 1.0132% if the market increased by 1%.
Liquidity for a company is “the ability of a firm to meet its near-term obligations as they come due” ( Walther, Financial Accounting, 2011, Chapter 4, p.57 ). Investors and creditors look at how liquid a company is in order to determine the company’s ability to meet it’s scurrent obligations. Three ratios to be considered are Working Capital, the Current Ratio, and the Quick Ratio. Three companies have been chosen and their Annual Reports as reported to the Securities and Exchange Commission (SEC) will be reviewed. A determination for each company’s liquidity position will be discussed based on the findings and compared to Management’s view as stated in the Annual Reports. The three companies chosen are Dell Inc., Genesco Inc., and ConAgra Foods Inc.
The first major aspect of the monetary policy by the Federal Reserve is its interest rate policy. This interest rate policy is mainly determined by the figure for the federal funds rate, which is the rate at which commercial banks with balances held within the Federal Reserve can borrow from each other overnight in ord...
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
The mining industry is a billion dollar industry that has been around for years. Miners and business insiders know exactly how lucrative the business is. In calendar your 2016 a net profit of $US20 billion was the aggregated profit for global miners. Mining comes at a cost and the deaths of miners is one of the costs. One of the most disastrous mining accidents took over 1500 lives. Still over the world needs miners. To prevent accidents the mining industry has stricter safety regulations. At the same time the industry has also had technological improvements. The stricter safety regulations and technological improvements in mining are
One might know that time is one of the most valuable assets in our lives. In the financial world the value of money is linked to time, primarily because investors expect progressive returns on their cash over periods of time, and they always compare the return from certain investments with the going or average returns in the market. Inflation on other hand erodes the purchasing power of money causing future value of one dollar to be less than the present value of a dollar. This paper will examine time value of money and the applications that determine successes or failures. An examination of the different vehicles that can be used to generate financial security for corporations and individuals will be provided. After defining the applications that generalize time value of money, an explanation will be offered regarding the components of interest rates by expanding on the concept that interest rate equates the future value of money with present value.
Corporate liquidity is an interim characteristic that often referred to as the measure of the extent to which a company, an organization or a person has cash to pay for the short-term obligations. In accounting, liquidity is an extent of the capacity of a debtor to pay the debts when they are expected to be paid. It is often expressed as a fraction or a proportion of current liabilities.
4. Harry Davis’s common stock is currently selling at $50 per share. Its last dividend (D0) was $4.19, and dividends are expected to grow at a constant rate of 5% in the foreseeable future. Harry Davis’s beta is 1.2, the yield on T-bonds is 7%, and the market risk premium is estimated to be 6%. For the bond yield plus risk premium approach, the firm uses a 4% point risk premium.