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The IUP Journal of Financial Risk Management
ISSN: 0972-916X
A ‘peer reviewed’ journal indexed on Cabell’s Directory,
and also distributed by EBSCO and Proquest Database

Mar'16

Previous Issues

The IUP Journal of Financial Risk Management is a quarterly journal that focuses on identifying financial risk, risk management models, accounting for derivatives, risk-hedging techniques, asset liability management. The journal provides a platform for cutting edge research in the field of financial risk management.

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Editorial Board
Information to Authors
  • Identifying Financial Risk
  • Risk Management Models
  • Accounting for Derivatives
  • Risk-Hedging Techniques
  • Asset Liability Management
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The Quantile Regression Approach to Analysis of Dynamic Interaction Between Exchange Rate and Stock Returns in
Emerging Markets: Case of BRIC Nations
On the Probability of Maximum Severity of Ruin for a Classical and Renewal Risk Model
Hedging Practices Used by Indian Companies in Managing Foreign Exchange Risk
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Contents
(Mar'16)

The Quantile Regression Approach to Analysis of Dynamic Interaction Between Exchange Rate and Stock Returns in Emerging Markets: Case of BRIC Nations

--Shekhar Mishra

The present paper examines the dynamic interaction between stock returns and exchange rate changes in the emerging economies of BRIC (Brazil, Russia, India and China). The paper tries to analyze the portfolio balance effect according to which the two variables are expected to be negatively related. Since under non-normality conditions and heterogeneous conditional distribution, estimation using Ordinary Least Squares (OLS) method may be biased and not much favorable, quantile regression model is adopted to analyze the relationship between stock returns and exchange rate changes. The estimation shows similar patterns with significantly negative coefficients obtained from different quantile functions for Brazil, Russia and India. However, for China the coefficients are not so significantly negative. The negative coefficients indicate adherence of markets to portfolio balance effect. However, the coefficients can vary according to changing market conditions.

Article Price : Rs.50

On the Probability of Maximum Severity of Ruin for a Classical and Renewal Risk Model

--Palash Ranjan Das and Gopal Govindasamy

The authors of this paper engage ruin theory as a mathematical basis for quantifying the financial risks in insurance industry. Considering a classical risk model with dividend barrier it is calibrated to obtain the maximum probability of ruin when the claim amount distribution is either exponential or Erlangian. It is to be noted that for numerical evaluation, the premium loading factor is taken to be 20% in both the cases. In order to ensure fair comparison, exponential and Erlangian parameters have been chosen in such a way that their mean and the expected total claims are same for both the distributions over a given time interval. Ultimately, it is generalized that the classical risk model by considering a renewal risk model can be used to find an expression for the maximum severity of ruin in the insurance industry.

Article Price : Rs.50

Hedging Practices Used by Indian Companies in Managing Foreign Exchange Risk

--Hiren Maniar

In the light of globalization and internationalization of world markets, foreign exchange risk has become one of the most difficult and persistent problems with which firms must cope. Economic reforms initiated by the Indian government in 1991 have created enormous opportunities for Indian economy and the same has helped Indian companies in opening trade opportunities with global companies, but it has come at the cost of huge volatility of Indian Rupee (INR) against various foreign currencies. The purpose of this research paper is to study the hedging practices for managing foreign exchange risk as adopted by the select 50 export-oriented Indian companies on various parameters like hedging coverage, hedging policy decision, hedging tenure, hedging instruments, number of currencies for hedging, hedging approach and involvement, hedging strategies execution and hedging benefits. The research uses questionnaire as a primary data collection tool and Microsoft Excel spreadsheet and other statistical techniques for analyzing research data for the study. Overall, this research has made an attempt to present a viable scenario about hedging practices used in managing foreign exchange risk by the surveyed 50 export-oriented Indian companies, and the findings would give future research direction for further study on hedging practices adopted by other Indian companies, especially companies in the Indian infrastructure sector which are importing inputs, mainly commodities/raw materials, and raising fund in foreign currencies.

Article Price : Rs.50

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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