Case studies Minor Risk in cooperation with DRS:
Michiel Hopman is coordinator of the Minor RISK (Risk management for financial institutions). In the last course of this minor, a group of students (2-5 Bachelor students) explores a practical case study regarding Risk Management in Financial Institutions. Some examples of these case studies are described below.
If your Financial Institution is interested in providing a case study on a practical risk management topic, please reach out to Michiel Hopman (firstname.lastname@example.org). The case studies will take place every year in the full month of January.
How effective is the unconventional monetary policy Quantitative Easing in achieving financial stability and economic growth?
The goal of this paper is to test if quantitative easing has an effect on inflation and on the gross domestic product of a country. Therefore, the relationship between the balance sheet of the Central Bank and their financial stability and economic growth is examined. Hereafter the research question can be answered: How effective is the unconventional monetary policy Quantitative Easing in achieving financial stability and economic growth?
Differences in funders of mortgages
This research paper provides an overview of the distribution of the Dutch mortgage market between different financial institutions. First, we describe the current Dutch mortgage market and recent trends. Then, we have a more detailed look on how these trends can be explained by the business model and new regulations. The long-term duration of mortgages match the duration of the liabilities of insurance companies and pension funds very well. Furthermore, the regulations favor mortgages being held by insurers and pension funds over banks. We will also include risk scenario’s and how these might affect the different financial institutions. Finally, we will provide a future outlook and our personal recommendations. Ideally, banks further decrease their mortgage portfolio in the upcoming years and take on the role of intermediators that use their expertise to issue mortgages and sell them off to investors. This way, banks still maintain a leading role in the mortgage market, but will not have the actual mortgages on their balance sheet.
Business models of banks in a low interest rate environment
While it is generally understood that banks suffer in a low interest rate environment, it is less clear which types of banks are affected the most. To further investigate how the central banks’ monetary policy translates to banks’ behavior and choices it’s important to look at how the profitability of banks has fared in the face of negative interest rates and what risks are associated with a steady state of low interest rates.
Credit Risk Overview in Commercial Real Estate: A Netherlands Perspective
This paper analyzes the Dutch commercial real estate sector to uncover potential risks that could face banks that lend in this sector, as well as explore major opportunities and trends in the dutch CRE. The goal is to summarize the key findings and come up with recommendations for Dutch banks in general and ING in particular. The research is conducted by reviewing arious literature and the latest published reports covering every aspect from economic developments to new financial advancements. We conclude that given the latest developments in the sector, it is profitable for Dutch banks to increase their exposure in the Dutch CRE sector while at the same time continuously improving their credit risk assessment techniques to manage potential risks.
Investigating unforeseen risks using scenario-analysis
Duinweide Supermarkten is an investment fund that contains the real estate of twelve supermarkets. In this report, two scenarios will be used to analyse the effect on liquidity, capital, and the share price of Duinweide. In scenario analysis, different outcomes are developed outside equilibrium models and probability intervals. Therefore, extreme situations with high uncertainty are created. Scenario thinking allows Duinweide to be more adaptive and react quicker to signals established in the scenarios.
Investigation on the PRIIPs regulation (Packaged Retail and Insurance-based Investment Products).
The objectives of this study is are:
- investigate the current status of the PRIIPS regulation for the funds;
- determine how the KID (Key Information Document) for the funds should look like;
- determine how the risks should be calculated for the funds;
- give advice how the risk calculation periodically can be performed by the fund manager;
- determine how the cost of the funds should be calculated and presented in the KIDs; and
- if possible, create the KIDs for the funds.
Exploring and improving the model for a System Risk Indicator
To reach this goal, several questions around this model has been explored:
- Do these submarkets provide an adequate overview of the entire financial system?
- Does the current weighing between markets adequately reflect the financial system?
- Do the separate indicators per submarket give a complete view of the specific submarket?
- If not, what alternative indicators or weights do you recommend?
- How often do the separate parts of the model have to be reviewed/calibrated?
- Can you describe the indicator, its components and use to the investment community?
The outcome of this case study may be used to improve the indicator and eventually publish the indicator as publicly available data-source.