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The Concept Proposal of Crypto-Asset Collateralization Service for FinTech Companies in the European Union
Páter, Vít ; Zinecker, Marek (referee) ; Bumberová, Veronika (advisor)
The thesis focuses on the concept of cryptoasset collateralization service for FinTech companies in the EU. An analysis of the external environment using the PEST framework was conducted, including documentary analysis of legislation, evaluation of economic factors, and analysis of crypto investor behavior. A fundamental analysis was conducted to select suitable cryptoassets for use as collateral. Using the synthetic COP method, opportunities, issues, and challenges associated with the concept were identified. The proposed comprehensive service concept ensures profit generation, security, and risk minimization. The goal is to provide a reliable service for FinTech companies in response to the technological shift in the cryptoasset field.
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The Modern Money Creation Process: The Case of Collateral Crunch
Kroulíková, Šárka ; Teplý, Petr (advisor) ; Gapko, Petr (referee)
The aim of this thesis is to investigate the role of the wholesale funding in the modern credit intermediation process and to estimate the possible impact of pro- posed regulation of the wholesale funding on lending activity of a bank or its risk profile. Throughout the analysis we used data set of 132-1167 banks from the European Union (number of banks depends on the hypotheses tested) during the period 2006-2012. We found that the banks that are more exposed to the whole- sale funding are able to increase their lending relatively more in comparison to the less exposed banks; this advantage is wiped out during the times of liquidity or collateral crunch. Results of defined simultaneous equation model suggest that stricter eligibility criteria, higher margins and introduction of 100% threshold for the Net Stable Funding Ratio will significantly decrease the wholesale funding ra- tio and thus limit the supply of loans. We consider those results alarming since the majority of European enterprises is financed by the financial intermediaries, not on the capital market and therefore additional limitation of the wholesale funding activities could negatively influence the overall economic activity within the Euro- pean Union. We discovered that the commercial banks tent to transfer the costs of the wholesale...
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The Modern Money Creation Process: The Case of Collateral Crunch
Kroulíková, Šárka ; Teplý, Petr (advisor) ; Gapko, Petr (referee)
The aim of this thesis is to investigate the role of the wholesale funding in the modern credit intermediation process and to estimate the possible impact of pro- posed regulation of the wholesale funding on lending activity of a bank or its risk profile. Throughout the analysis we used data set of 132-1167 banks from the European Union (number of banks depends on the hypotheses tested) during the period 2006-2012. We found that the banks that are more exposed to the whole- sale funding are able to increase their lending relatively more in comparison to the less exposed banks; this advantage is wiped out during the times of liquidity or collateral crunch. Results of defined simultaneous equation model suggest that stricter eligibility criteria, higher margins and introduction of 100% threshold for the Net Stable Funding Ratio will significantly decrease the wholesale funding ra- tio and thus limit the supply of loans. We consider those results alarming since the majority of European enterprises is financed by the financial intermediaries, not on the capital market and therefore additional limitation of the wholesale funding activities could negatively influence the overall economic activity within the Euro- pean Union. We discovered that the commercial banks tent to transfer the costs of the wholesale...
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The Switch from LIBOR to OIS Discounting
Kotálová, Magdalena ; Stádník, Bohumil (advisor) ; Staniek, Dušan (referee)
The main contribution of the diploma thesis is to give a comprehensive picture of the switch from LIBOR to OIS discounting. Prior to the global financial crisis, LIBOR (London Interbank Offered Rate) represented an approximation of the risk-free rate in the valuation of interest rate derivatives. The collapse of Lehman Brothers in 2008 resulted in sharp widening of the LIBOR-OIS spread, an indicator of the interbank market stress. Many derivative practitioners have become concerned about the choice of an appropriate risk-free rate. Traditional valuation approaches using LIBOR discounting have been reviewed. Meanwhile, the OIS (Overnight Indexed Swap) rate has become a better proxy for the risk-free rate, at least for collateralized or centrally cleared transactions. Firstly, the research aims to discover the divergences between LIBOR rates, popular pre-crisis proxies for the riskfree rate, and OIS rates, their post-crisis alternatives. Secondly, it covers the interbank lending market, and analyzes individual LIBOR-OIS spreads for the USD, EUR, GBP and CZK currency. Thirdly, it explores the transition to OIS discounting in connection with an influence on a wide spectrum of interest rate derivatives. Therefore, any potential effects are demonstrated on numerical valuation examples of interest rate swaps in the USD, EUR, and GBP currency. Finally, the diploma thesis addresses a topic of collateral management and clarifies different approaches using LIBOR or OIS rates for collateralized or non-collateralized transactions.
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Current trends in OTC derivatives markets
Šimko, Marek ; Dvořák, Petr (advisor) ; Witzany, Jiří (referee)
The uppermost goal of this diploma thesis is aimed at identification and evaluation of the current trends in one of the largest segments of financial markets. Special attention has been devoted to the regulatory changes, which have not been completely implemented in all major jurisdictions so far. The introductory part deals with the nowadays situation and explanation of post-crisis measures leading to a higher level of transparency and system stability. The following chapters analyze the key elements contributing to specific trends whereby those findings are based on research studies published by the world leading universities and central banks. The author also observes alternative functional concepts in the market and potential impacts affecting real transactions. The final portion has been dedicated to analysis of practical implications in terms of increased costs related to the trades and possible prospective outlook of the OTC derivatives market. The whole text is accompanied by authors personal reflections and comparison between the most important trading regions in respect to the value of underlying assets.
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Oceňování derivátů v postkrizovém období / Post crisis valuation of derivatives
Baran, Jaroslav ; Witzany, Jiří (advisor) ; Mandel, Martin (referee) ; Lukáš, Ladislav (referee)
In this study we analyse relationship between classical approach to valuation of linear interest rate derivatives and post-crisis approach when the valuation better reflects credit and liquidity risk and economic costs of the transaction on top of the risk-free rate. We discuss the method of collateralization to diminish counterparty credit risk, its impact on derivatives pricing, and how overnight indexed swap (OIS) rates became market standard for discounting future derivatives' cash flows. We show that using one yield curve to both estimating the forward rates and discounting the expected future cash flows is no longer possible in arbitrage free market. We review in detail three fundamental interest rate derivatives (interest rate swap, basis swap and cross-currency swap) and we derive discount factors used for calculating the present value of expected future cash flows that are consistent with market quotes. We also investigate drivers behind basis spreads, in particular, credit and liquidity risk, and supply and demand forces, and show how they impact valuation of derivatives. We analyse Czech swap rates and propose an estimation of CZK OIS curve and approximate discount rates in case of cross-currency swaps. Finally, we discuss inflation markets and consistent valuation of inflation swaps.
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Credit risk of central bank foreign exchange operations
Vlazneva, Anna ; Brůna, Karel (advisor) ; Skoupil, Lubomír (referee)
The current thesis titled "Credit risk of central bank foreign exchange operations" aims to explain the concept of credit risk and its types from theoretical perspective and to define sources of credit risk that are specific for central banks and which arise from central bank's operations. It also aims at the analysis of possible methods of credit risk limitation. The practical part of this thesis is dedicated to the study of specific sources of credit risk as well as methods of credit risk management which are presented on the examples of the central banks of Great Britain, Japan and the European central bank. Closer attention is also paid to the response of these central banks to the 2008 financial crisis and the impact that this crisis had on the extent of their exposure to credit risk.
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Collateral use for financial derivatives
Nguyenová, Le Ha ; Baran, Jaroslav (advisor) ; Málek, Jiří (referee)
The bachelor thesis focuses on the topic of "Collateral use for financial derivatives". Collateral is used as a tool to mitigate credit risk in the financial derivatives contracts. The aim of this thesis is to analyze advantage and disadvantage of using the collateral, to describe different types of assets accepted and provided as the collateral and to explain the process called magrin call. The importance of using the collateral effectively depends on the well-negotiated contracts (the ISDA Master Agreement, CSD) and on the collateral management.
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