Eligible Assets Research Articles

Peran Yayasan Baitul MALLPLN dalam Meningkatkan Perekonomian Mustahiq dalam Penyaluran Dana Zakat

Distribution of zakat funds to develop the mustahiq economy is an act of charity in Islam where zakat funds are distributed to people who qualify as mustahiq (zakat recipients) with the aim of improving their welfare and economy. This process can be explained as, Mustahiq Identification The first step is to identify the person or family who qualifies as mustahiq. Mustahiq are individuals or families who meet the criteria of Islamic sharia and need financial assistance to meet their basic needs. Zakat Calculation Zakat is one of the religious obligations in Islam which orders Muslims to give a portion of their eligible assets to mustahiq. The distribution of zakat is based on calculating a certain percentage of assets subject to zakat. Distribution of Funds. After the zakat funds have been identified and calculated, the next step is to distribute the funds to the mustahiq. This can be done in various ways, including providing direct assistance, providing business capital, providing skills training, or providing interest-free loans.

Money Market Disconnect

Abstract A repurchase agreement (repo) is a source of cash and collateral. We document that the money market is more segmented when the collateral motive prevails. Two crucial aspects of the central bank framework lead to this disconnect: banks’ access to the central bank’s deposit facility and assets’ eligibility for quantitative easing (QE). We show that repo rates lent by banks with access to the deposit facility and secured by QE eligible assets are more collateral-driven and disconnected from funding-based money market rates. Our results are relevant for different monetary policies and have suggestive implications for the monetary policy pass-through. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Combining multi-asset and intrinsic risk measures

The risk of a future payoff is commonly quantified by calculating the costs of a hedging portfolio such that the resulting position is acceptable, i.e., that it passes a capital adequacy test. A multi-asset risk measure describes the minimal external capital which has to be raised into multiple eligible assets to make a future position acceptable. Recently, the alternative methodology of intrinsic risk measures was introduced in the literature. These ask for the minimal proportion of the financial position which has to be reallocated to pass the capital adequacy test, i.e., only internal capital is used.We combine these two concepts and call this new type of risk measure a multi-asset intrinsic risk measure. It allows to secure the financial position by external capital as well as reallocating parts of the portfolio as an internal rebooking. We investigate several properties to demonstrate similarities and differences to the two aforementioned classical types of risk measures. We find that diversification reduces the capital requirement only in special situations depending on the financial positions. With the help of Sion's minimax theorem we also prove a dual representation for multi-asset intrinsic risk measures. Finally, we determine capital requirements in a model motivated by the Solvency II methodology.

ПРОБЛЕМИ РОЗВИТКУ СТРАХУВАННЯ ЖИТТЯ В УКРАЇНІ ТА ШЛЯХИ ЇХ ВИРІШЕННЯ

Today, insurance is a source of enrichment for the state's economy, not just an instrument of financial protection. The article examines the essence of life insurance and the relevance of life insurance in Ukraine. Life insurance is insurance that protects the property interests of the insured person related to his life and death. In order to insure the life of any person, you need the presence of insurance interest in it from the insured. The analysis of the insurance market is investigated. The insurance market showed a moderate increase in the volume of eligible assets and insurance reserves. At the same time, the assets of life insurers are constantly growing, despite the corona crisis. As for the assets of Non-life insurers, there is a slight reduction. The volume of total assets of insurers, the structure of accepted assets, insurance premiums and insurance payments of insurance companies, the amount of paid insurance payments are analyzed. The structure of eligible assets consists of more than 50% of bank deposits. This is due to both profitability and a detailed study of the supervision of the encumbrance and availability of such deposits and not including them in eligible assets. Stably high share in eligible assets belongs to real estate, which is partly represented by land and residential real estate, which are regularly revalued. The life insurance market is not large and has a high concentration, so a list of the largest risk insurers by gross premiums, life insurers by premiums, life insurers by benefits. At the same time, at the moment there are a number of problems in the Ukrainian insurance market that do not allow this type of activity to develop at the same level as in developed countries. The solution of the selected problems is possible only by combining the efforts of the state and insurance companies. A number of necessary measures have been proposed to increase the efficiency of life insurance in Ukraine. Namely: to enable insurance companies to participate in solving social problems, the state should increase the requirements for insurance companies and the necessary interesting and attractive insurance programs that would meet the needs of the population, would respond to new social problems.

ОСОБЛИВОСТІ ВИЗНАЧЕННЯ ФІНАНСОВОЇ СТІЙКОСТІ СТРАХОВИХ КОМПАНІЙ В УМОВАХ РЕФОРМУВАННЯ РИНКУ ФІНАНСОВИХ ПОСЛУГ

The insurance market of Ukraine is the second large in terms of capitalization among non-bank financial markets in Ukraine. The purpose of the study is the development of theoretical and methodological provisions and practical tools for assessing the insurance market financial stability. The financial stability of the insurance market is a dynamic characteristic of its functioning. It involves the ability of the market to reach the main goals of its development and ensure a sufficient risk coverage of economic entities and an effective system of redistribution of insurance risks. The regulator continues liquidation of insurance companies that do not provide any insurance activity. These measures have a positive effect on the financial stability of the insurance market of Ukraine in the long-term perspective. The level of financial stability of the insurance market is a complex con-cept and requires a comprehensive assessment. In the study, the structure of the integral indicator for assessing the financial stability of the insurance market includes such indicators as: the share of the most liquid and safe eligible assets, insurance reserves, the level of insurance payments, the volume of premiums be-longing to nonresident reinsurers. During the analyzed period, the value of the indicator reached its maximum in the III quarter of 2022, which indicates the highest level of financial stability of the insurance market of Ukraine during the analyzed period. In the 1st quarter of 2022, there was a noticeable failure of the financial stability of the insurance market of Ukraine, which relates to the conduct of economic activity in the conditions of the first shock since the beginning of the war in Ukraine. During the analyzed period, there was a tendency to increase the value of the integral indicator of the level of financial stability of the insurance market of Ukraine, which is a positive trend. Thus, the use of an integral indicator of assessing makes it possible to obtain a comprehensive description of the insurance market financial stability at a specific moment in time to identify points of the financial stability improvement.

Flight Abroad in the Euro Area: Evidence From a ECB Collateral Framework Change

This paper studies the effect of central bank collateral policy on bank credit supply and the real economy. In 2007, the European Central Bank replaced national collateral lists with a single list valid across the euro area. Banks holding newly eligible assets experienced a reduction in their cost of funding. Consequently, they lent more compared to banks without such assets, and they extended more loans to riskier and less productive borrowers located in other euro area countries. These borrowers in turn experienced a growth in employment and investment. The results highlight the role of financial integration in fueling cross-border credit booms.

Scalar Multivariate Risk Measures with a Single Eligible Asset

In this paper, we present results on scalar risk measures in markets with transaction costs. Such risk measures are defined as the minimal capital requirements in the cash asset. First, some results are provided on the dual representation of such risk measures, with particular emphasis given on the space of dual variables as (equivalent) martingale measures and prices consistent with the market model. Then, these dual representations are used to obtain the main results of this paper on time consistency for scalar risk measures in markets with frictions. It is well known from the superhedging risk measure in markets with transaction costs that the usual scalar concept of time consistency is too strong and not satisfied. We will show that a weaker notion of time consistency can be defined, which corresponds to the usual scalar time consistency but under any fixed consistent pricing process. We will prove the equivalence of this weaker notion of time consistency and a certain type of backward recursion with respect to the underlying risk measure with a fixed consistent pricing process. Several examples are given, with special emphasis on the superhedging risk measure.

Time consistency for scalar multivariate risk measures

Abstract In this paper we present results on dynamic multivariate scalar risk measures, which arise in markets with transaction costs and systemic risk. Dual representations of such risk measures are presented. These are then used to obtain the main results of this paper on time consistency; namely, an equivalent recursive formulation of multivariate scalar risk measures to multiportfolio time consistency. We are motivated to study time consistency of multivariate scalar risk measures as the superhedging risk measure in markets with transaction costs (with a single eligible asset) (Jouini and Kallal (1995), Löhne and Rudloff (2014), Roux and Zastawniak (2016)) does not satisfy the usual scalar concept of time consistency. In fact, as demonstrated in (Feinstein and Rudloff (2021)), scalar risk measures with the same scalarization weight at all times would not be time consistent in general. The deduced recursive relation for the scalarizations of multiportfolio time consistent set-valued risk measures provided in this paper requires consideration of the entire family of scalarizations. In this way we develop a direct notion of a “moving scalarization” for scalar time consistency that corroborates recent research on scalarizations of dynamic multi-objective problems (Karnam, Ma and Zhang (2017), Kováčová and Rudloff (2021)).

A new view on risk measures associated with acceptance sets

In this paper, we study properties of certain risk measures associated with acceptance sets. These sets describe regulatory preconditions that have to be fulfilled by financial institutions to pass a given acceptance test. If the financial position of an institution is not acceptable, the decision maker has to raise new capital and invest it into a basket of so called eligible assets to change the current position such that the resulting one corresponds with an element of the acceptance set. Risk measures have been widely studied. The risk measure that is considered here determines the minimal costs of making a financial position acceptable. In the literature, monetary risk measures are often defined as translation invariant functions and, thus, there is an equivalent formulation as Gerstewitz-Functional. The Gerstewitz-Functional is an useful tool for separation and scalarization in multiobjective optimization in the non-convex case. In our paper, we study properties of the sublevel sets, strict sublevel sets and level lines of a risk measure defined on a linear space. Furthermore, we discuss the finiteness of the risk measure and relax the closedness assumptions.

Combining multi-asset and intrinsic risk measures

The risk of a future payoff is commonly quantified by calculating the costs of a hedging portfolio such that the resulting position is acceptable, i.e. that it passes a capital adequacy test. A multi-asset risk measure describes the minimal external capital which has to be raised into multiple eligible assets to make a future risky position acceptable. Recently, the alternative methodology of intrinsic risk measures was introduced in the literature. These ask for the minimal proportion of the risky position which has to be reallocated to pass the capital adequacy test, i.e. only internal capital is used. We combine these two concepts and call this new type of risk measure a multi-asset intrinsic risk measure. It allows to secure the risky position by external capital as well as reallocating liquid parts of the portfolio as an internal rebooking. We investigate several properties to demonstrate similarities and differences to the two aforementioned classical types of risk measures. We find that diversification reduces risk only under an additional but economically motivated assumption on the risky positions. With the help of Sion’s minimax theorem we also prove a dual representation for multi-asset intrinsic risk measures. Finally, we determine capital requirements in a model motivated by the Solvency II methodology.

Distributed Ledger Technology (‘DLT’) and its Impact (on the Regulation of) European Investment Funds

The emergence of blockchain, other distributed ledger technologies (‘DLT’) and the potential of asset tokenization has led to a lot of attention in the past three years. Despite ‘ICO scams’ in 2017 and 2018, the use of DLT-based tokens in financial markets has nevertheless kept growing, and asset tokenization has become one of the most prominent use-cases of DLTs in the financial markets. Tokenized assets includes securities (e.g. stocks and bonds), but also commodities (e.g. gold) and other non-financial assets (e.g. real estate). Asset tokenization has potential cross-cutting implications for financial market practices and participants, market infrastructures and regulators across a large range of financial instruments and asset classes. Given the above, a discussion on the potential implications of asset tokenization and DLT in general for European investment funds is warranted. Increased use of DLT and asset tokenization could have widespread potential benefits in terms of cost and speed efficiencies, increased transparency and liquidity. Although the use of DLT and tokenization in (European) investment funds is currently limited, its potential is significant. Careful consideration of the possible impact of DLT and the use of asset tokenization in the field of (European) investment funds will allow policy makers to anticipate potential perils linked to the wider use of DLT by (European) investment funds. This contribution provides a high-level overview of the use of DLT and asset tokenization for (European investment funds). It starts by giving a concise overview of European investment fund law in general. In particular, Section 2 explains the law and economics of European fund governance consisting of a tripartite relationship between fund managers, depositaries and investors. It continues to explain in Section 3 that, currently, the application of DLT has to be seen as a natural evolution of European investment funds and its legal framework; and not as disruption thereof. Section 4 touches upon the to be expected impact of DLT and asset tokenization on fund managers. It analyzes in detail the impact of DLT on the tasks of fund managers under the AIFMD and UCITSD consisting of (i) investment management, (ii) administration and (iii) marketing. Section 5 discusses the restrictions of European investment fund investing in tokenized assets set by European and national eligible asset requirements (i.e. ‘product regulation’). Section 6 discusses the impact of DLT and tokenized assets on AIFMD and UCITSD depositaries, Section 7 discusses the to be expected impacts of DLT on (European) investment funds on the short, medium and long-term and Section 8 concludes.

The evolution of European economic institutions during the COVID-19 crisis.

This article argues that the incomplete economic and institutional integration of the euro area has exposed the monetary union to increasing economic divergence, which could be deepened by the COVID‐19 crisis. We discuss how monetary and fiscal measures implemented at the onset of the pandemic have contributed to mitigate the economic consequences of lockdowns, but provided limited insurance to narrow economic gaps across member countries. However, EU countries agreed on July 21, 2020 to develop, for the first time, countercyclical fiscal transfers financed by common debt issuance. We discuss the potential of this instrument to contribute to improve the resilience of the eurozone.

Good-Deal Bounds for Option Prices under Value-at-Risk and Expected Shortfall Constraints

In this paper, we deal with the pricing of European options in an incomplete market. We use the common risk measures Value-at-Risk and Expected Shortfall to define good-deals on a financial market with log-normally distributed rate of returns. We show that the pricing bounds obtained from the Value-at-Risk admit a non-smooth behavior under parameter changes. Additionally, we find situations in which the seller’s bound for a call option is smaller than the buyer’s bound. We identify the missing convexity of the Value-at-Risk as main reason for this behavior. Due to the strong connection between good-deal bounds and the theory of risk measures, we further obtain new insights in the finiteness and the continuity of risk measures based on multiple eligible assets in our setting.

The Effect of Regulatory Constraints on Fund Performance: New Evidence from UCITS Hedge Funds*

Abstract This article examines the effect of regulatory constraints on fund performance and risk by comparing conventional and UCITS hedge funds. Using a matching estimator approach, we estimate the indirect cost of UCITS regulation to be between 1.06% and 4.05% per annum in terms of risk-adjusted returns. These performance differences are likely to stem from UCITS constraints such as those governing eligible assets, diversification, and short selling, and cannot be explained by differences in redemption terms or level of leverage. We confirm that our performance results are not driven by management company characteristics, fund manager characteristics, or unobserved confounder bias.

Reform of the French IP Regime: Overview of Conditions and Opportunities

The French tax regime for IP income was deeply modified by the 2019 Finance Act in order to comply with the latest OECD and EU standards on harmful tax regimes. The new French IP regime is more restrictive in that it introduces the Nexus rule, is applicable to net rather than gross income, and generally excludes patentable inventions from the list of eligible assets (except for SMEs). It however presents several new opportunities, including a reduced 10% tax rate and an extension of its scope, under relevant conditions, to software income. An assessment of the possible benefits from the regime is recommended, primarily for tech companies of course, but also for other businesses, e.g. for the many non-tech groups which centrally develop software for use by affiliates throughout the world.

Existence, uniqueness, and stability of optimal payoffs of eligible assets

AbstractIn a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of prespecified eligible assets in order to pass a given capital adequacy test. From a capital efficiency perspective, it is important to be able to do so at the lowest possible cost and to identify the corresponding portfolios, or, equivalently, their payoffs. We study the existence and uniqueness of such optimal payoffs as well as their behavior under a perturbation or an approximation of the underlying capital position. This behavior is naturally linked to the continuity properties of the set‐valued map that associates to each capital position the corresponding set of optimal eligible payoffs. Upper continuity can be ensured under fairly natural assumptions. Lower continuity is typically less easy to establish. While it is always satisfied in a polyhedral setting, it generally fails otherwise, even when the reference risk measure is convex. However, lower continuity can often be established for eligible payoffs that are close to being optimal. Besides capital adequacy, our results have a variety of natural applications to pricing, hedging, and capital allocation problems.

Does Liquidity Regulation Impede the Liquidity Profile of Collateral?

We analyze the pledging behavior of Euro area banks during the introduction of the liquidity coverage ratio (LCR). The LCR considers only a subset of central bank eligible assets and thereby offers banks an arbitrage opportunity to improve their regulatory ratio by altering their collateral pledging with the European Central Bank. We use the existence of national liquidity requirements to proxy for banks’ incentives to exploit this differential treatment of central bank eligible assets. Using security-level information on collateral pledged with the central bank, we find that banks without a preceding national liquidity requirement pledge more and less liquid collateral than banks with a preceding national liquidity requirement after the LCR introduction. We attribute the difference across banks to a preparation effect of the liquidity regulation on the national level. JEL Classification: G21, G28, E42, E52, E58

Which eligible assets are compatible with comonotonic capital requirements?

Within the context of capital adequacy, we study comonotonicity of risk measures in terms of the primitives of the theory: acceptance sets and eligible, or reference, assets. We show that comonotonicity cannot be characterized by the properties of the acceptance set alone and heavily depends on the choice of the eligible asset. In fact, in many important cases, comonotonicity is only compatible with risk-free eligible assets. The incompatibility with risky eligible assets is systematic whenever the acceptability criterion is based on Value-at-Risk or any convex distortion risk measure such as Expected Shortfall. These findings qualify and arguably call for a critical appraisal of the meaning and the role of comonotonicity within a capital adequacy context.

Intrinsic Risk Measures

Monetary risk measures are usually interpreted as the smallest amount of external capital that must be added to a financial position to make it acceptable. We propose a new concept: intrinsic risk measures and argue that this approach provides a direct path from unacceptable positions towards the acceptance set. Intrinsic risk measures use only internal resources and return the smallest percentage of the currently held financial position which has to be sold and reinvested into an eligible asset such that the resulting position becomes acceptable. While avoiding the problem of infinite values, intrinsic risk measures allow a free choice of the eligible asset and they preserve desired properties such as monotonicity and quasi-convexity. A dual representation on convex acceptance sets is derived and the link of intrinsic risk measures to their monetary counterparts on cones is detailed.

ETFs vs Structured Notes: The Equity Yield Enhancement Puzzle

Under a particular low rates global context, the portfolio optimization question is more relevant than ever. This unveils more implicit problems which long-only investors face as well as monitor and control risks, satisfy regulatory requirements while seeking to translate a market anticipation into position in the simplest and the more comprehensible assets they can find to avoid unwanted technical downturn, and optimize their structure of fees.However, with a wide range of eligible asset classes, and under a diversification purpose, the portfolio optimization problem is often exceeded, including the aim of enhance yields in accordance with the portfolio structure and levels of hedging. This can be particularly relevant when traditional assets deliver a shifted conception of performance, meaning stocks can be invested for dividend yield and bonds for rate curve movements, and when volatility spikes obstruct a market long-term vision. This paper aims to introduce Exchange Traded Funds and structured notes as equity yield enhancement products, by presenting and confronting characteristics an investor have to focus when he seeks to find the product likely to match his needs.