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The subject of this paper deals with a particular insurance in the selected region. The first part is dedicated to the theoretical interpretation of the basic concepts in insurance, specific insurance products to the specifications used in the region. Second part details the specific types of insurance for individual assets selected entity and efficient use of non-life insurance.
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Contingent convertible bonds are designed to provide additional capital to banks in times of distress and discourage the risk-taking incentives of the stockholders and, hence, decrease bank credit risk. In this paper, we study bank CDS spreads as a proxy of credit risk during the periods around the announcement of contingent convertible bond issuance. We analyze whether investors see these bonds as signs of possible bank distress or the stabilizing mechanism decreasing the probability of bank default. We use event study methodology where abnormal CDS spreads are identified based on constant mean return model and basic market model. Our data sample consists of 41 banks with 109 current unique issues taken from Bloomberg. Our results indicate that CDS spreads show a systemic reaction to the announcement of contingent convertible instruments and are economically significant for the bond holders that value the decreased default probability and reduced risk incentives of the issuing institution.
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A protracted period of low interest rate threatens the stability of the life insurance industry, especially in the countries, where life insurance with comparatively high guaranteed returns disposed in the past represents a major portion of the total portfolio. The aim of this paper is to provide an introduction to evaluation of the effects of the actual low interest rate period on the balance sheet of a representative life insurance company. Firstly the balance sheet of insurance companies is introduced. We show the valuation of the assets and liabilities. Then the Solvency Capital Requirement and risk margin is defined. Finally the solvency situation of insurers is valuated.
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Voluntary pension security plans play an important role in every pension system. Demographic changes in European countries cause that the value of pension benefits from the mandatory part of the pension system will be getting lower in the following years. This will have a significant effect on quality of life and consumption of retired people. In order not to increase the group of people at risk of poverty, one needs to increase the number of economically active persons who voluntarily save for their retirement. As part of the voluntary forms of pension security different products, mainly financial ones, are offered (often by banks, insurance companies, investment funds and pension funds). The contributions paid are invested mostly on the capital market (both safe and risky financial assets). However, on the market there are also alternative assets which in the long term can generate higher rates of return than investments in traditional assets. People who save money should consider including in the portfolio alternative assets which would affect also the diversification of the portfolio constituting voluntary pension security plans. Among alternative assets a special attention should be paid to real estate, gold, silver, arts, wine and whisky as well. In those types of assets investors can invest both directly and indirectly. The aim of the article is to assess the role which alternative investments play in voluntary pension security on the Polish market. To achieve that purpose, statistical methods, such as for example correlation coefficient, are used to assess the relationship between characteristics of describing alternative and traditional assets.
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The research is aimed at determining the interrelation of Russian banking sector concentration for most assets and liabilities in 2008-2015 with its main performance indicators, such as Return on Assets, Return on Equity and Capital Adequacy. We used a set of indices from the industrial organization theory to evaluate the level of concentration and unevenness in Russian banking sector and proposed the method of Herfindahl-Hirshman index decomposition to separate concentration caused by reduction in number of banks and by growing heterogeneity in banking sector. Having tested 4 statements concerning correlation between banking sector concentration and its main performance indicators, we have not found any functional connection between a particular bank share in total capital or assets and its performance, but revealed positive influence of concentration in banking system as a whole on its performance both at a snapshot and in time series. Additionally, we recognized a relatively negative contribution of small and medium-sized banks to Russian banking system's efficiency in the period of recession, whilst during recovery they, though being less effective than larger banks, form a zone of stability. Taking into account the support given to large banks by the state, we still bear in mind not only natural but also artificial origin of such a result. Finally, we state the need of effective control over the structure of the banking system.
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The aim of this paper is to examine the change in the fundamental investment characteristics, especially a change in the expected return and the risk of investment, provided that the investor will use the selected certificate with a partial guarantee on invested capital instead of a direct investment in the underlying asset. First will be selected an underlying asset. It will be then modeled the development of its value by Monte Carlo simulation. This development also affects the development of the value of alternative investments through a certificate. The certificate will be divided into components from which it is comprised, and these will be priced. Then it will be statistically evaluated and assessed the change in investment characteristics compared with investment characteristics of direct investment in the underlying asset. Finally, discussions will be carried out and formulated recommendations for the retail investor.
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In 2004, pension reform with fundamental influence on the function of the pension system was implemented in Slovakia. After the pension system reform, each Slovak citizen can save their money in pension funds. Since January 2013, pension fund management companies have had to establish at least two pension funds, one guaranteed bond fund and at least one unguaranteed equity fund. Nowadays, pension funds own a wide range of assets. The aim of this article is to monitor the composition of financial assets and relation between pension funds’ profit and components of financial assets they own. This relation will be described by linear regression model which aims to determine significant variables affecting the profit of these funds. The underlying model data will be chosen from balance sheet and income statements of Slovakia-based pension funds, managed by six pension fund management companies, from the time period 2009 to 2014. The results of this research contribute to a better understanding of the importance of certain types of financial assets owned by pension funds, and thus help improve the legislative management of pension funds in Slovakia and their impact on macroeconomics.
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Asset and liability management (ALM) in the current low/negative interest rate environment is a major concern for all banks. ALM is defined as the simultaneous planning of all asset and liability positions on the bank’s balance sheet under consideration of the different bank management objectives and legal, managerial and market constraints, for the purpose of mitigating interest rate risk, providing liquidity and enhancing the value of the bank. ALM is heavily dependent on the movement of interest rates in the market. The history of ALM suggests that it is very important for a financial institution to measure, manage and control interest rate risk. The aim of this paper is to show how a sample bank’s balance sheet might have looked like before and after the advent of the persistently low/negative interest rates environment. Further, we will show a duration structure of the example-bank´s balance sheet before the period of low and further falling rates sets in. Also in this paper we will present most important implications for ALM after the period of persistently low interest rates. To attain this goal, we analysed the 2008 and 2015 balance sheets of a medium commercial bank facing conflicting goals such as returns, liquidity, solvency, and expansion of deposits and loans under uncertainty.
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The Global Economic and Financial Crisis led central banks in advanced economies to adopt a variety of standard and non-standard measures to ease monetary conditions. In the US, the UK, and Japan the centerpiece of these non-standard measures has been large-scale purchases of financial assets, also known as quantitative easing (QE). Purchases of financial assets financed by central bank money increase liquidity and push up asset prices, as those who have sold assets to the central bank rebalance their portfolios into riskier assets.
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The aim is to characterise the risks of SMEs and recommending insurance mediation through experts, i.e. insurance intermediaries of commercial insurance companies. Furthermore this paper deals with insurance, insurance brokerage and selected risks of insurance risk by SMEs. Specifically on premium insurance products for SMEs their characteristics and evolution. This paper also presents current issues and trends in risk insurance intermediation for SMEs in Slovakia.
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Discussion between advocates of active and passive investments has been going on for at least three decades. Broadly speaking, evidence in favor of passive investments against active investment strategies has grown very strong during that period bringing active investments almost on the edge of obscure methods. The aim of this paper is to contribute to mentioned discussion by submitting an analysis of performance of actively managed funds in various stages of business cycle with given benchmarks within particular time periods and on particular markets.
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Subjects of financial markets who invest their funds in financial derivatives undergo high risks. The way how to protect from risk portfolio that includes warrants may be delta-hedging and gamma-hedging. The former is immune to the small changes in underlying asset's price and the letter even for greater changes in price. In this paper we try to answer the question what is the small change in price of an underlying asset. For this purpose we construct 50 portfolios which are delta-neutral and observe and compare how their value reacts to the certain levels of volatility of the underlying asset's price.
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The European insurance market is expanding rapidly. Currently, is has a larger share of premiums written than North America or Asia. However, there are big differences between national insurance markets. The paper is aimed at assessing the efficiency of national life insurance markets in Europe by applying DEA models. DEA models are nonparametric methods for assessing the efficiency and which use linear programming. For each analysed subject the efficiency score is expressed, and this score is then used to compare the transformation of multiple inputs into multiple outputs.
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In terms of countries of Central and Eastern Europe has developed mortgage banking in a form that puts the emphasis on mortgage loans. Several times we pointed out that these markets are not sufficiently benefit from mortgage bonds. The mortgage system in the developed countries of the world should benefit mainly of mortgage bonds as a source for funding and for investors as an appropriate object of investment with moderate returns and low risk.
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Volatility patterns and its dynamics are the core measures of risk in the financial theory. However, given the algorithmic nature of modern securities trading, frequently used parametric volatility models should be used with great caution when applied on high frequency data. Modelling volatility in high frequency data is fairly complex since such data contains a disruptive volatility component, which only occurs in this kind of data and is not observable in lower frequency data.
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The chapter focuses on the functioning of the institution of the Tourist Guarantee Fund as a tool of the state tourism policy, an obligatory pillar of security of tour operators and, in practice, an important tool to manage the risk accompanying tour operators’ activity. The theoretical part presents the operation of tour operators and its selected consequences, i.e. the need for risk management. Then, the conditions and mechanism behind the establishment of the Tourist Guarantee Fundare discussed, along with the most important formal framework for its operation and the resulting scope of tasks. The practical part, on the other hand, focuses on identifying key moments in the functioning of the TGF in the years 2016–2020. The considerations are based on rich literature, as well as on the analysis of materials published on one of the recognizable tourism industry portals, associated with one of the leading press titles – Turystyka.rp.pl portal.
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This article aims to introduce the concept of the value of human capital from both the historical and economic side. The impact of socio-economic changes primarily concerns people, their contribution, the impact on the quality and manner of their work, and thus on the value of human capital. Observations of changes, the development of technology, but also the strong influence of knowledge and education caused the division of social classes. The value of human capital has become an important factor of the “new economy”, where ultimately the science of accounting adds it to the balance sheet category of intangible assets. The article presents the main methods of calculating the value of human capital and their limitations. In addition, it aims to raise awareness of the contribution of work performed by each employee and its impact on the value of the company.
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Resilience finance is understood as an advancement of Socially Responsible Investments. In the wake of the COVID-19 economic fallout, unprecedented amounts of governmental rescue and recovery aid were allocated towards social and environmental causes. This paper argues that advances in Socially Responsible Investments are resilience finance pegged to noble causes but also ethics and ideologies. The COVID-19 bailout and recovery packages can potentially provide, if well-designed and properly-used, a unique opportunity to develop fairer and sustainable societies. Finance can imbue responsibility in the post-COVID-19 era in the establishment and fortification of the current Sustainable Development Goals but potentially also in negative screenings and sanction mechanisms in international law infringements. The article argues for a comparative Behavioral Law & Economics approach to understand the most contemporary international finance politics and responsible investment trends around the world.
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Detailed presentation of investment intermediation in the Bulgarian economic environment. Narrowing of the research on the specifics of intermediation on foreign exchange markets in Bulgaria. Brief description of innovations, legal restrictions, customer requirements, regulations, reporting and technical support. Explanation of investment security and capital security for the intermediary. Future development of the industry and opportunities for foreign exchange markets.
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Aging requires thinking about saving money for the time when people do not work anymore. However, it is a challenge nowadays because of high inflation and a dynamic global economic situation. It is not reasonable to keep all money as cash for the retirement period, and one should think about different forms of investments. In order to diversify risk, it is necessary not only to use traditional investments like stocks or bonds, but also to get acquainted with alternative ones. Typical assets like stocks or bonds can be partially replaced in the portfolio by some types of alternative investments like, for example, precious metals. It is most often gold, which is treated in scientific papers as a risk diversifier, so platinum is studied in this chapter. The research aims to analyze the investment features of platinum. The author tries to answer the question whether platinum can be a risk diversifier for stock investments. Statistics for this unique metal are checked and compared with those for stocks. The hypothesis is that platinum can be applied in risk management for stock portfolios helping to achieve a better relation of risk-return.
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