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Welcome to The IUP Journal of Financial Risk Management


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
  • Accountingfor Derivatives
  • Risk-Hedging Techniques
  • Asset Liability Management
Is CAPM Dead in Emerging Market? – Indian Evidence
The Impact of Intellectual Capital on Bank Risk: Evidence from Indian Banking Sector
Financial Distress Prediction: A Comparative Study of Solvency Test and Z-Score Models with Reference to Sri Lanka
Gold Price, Stock Price and Exchange Rate Nexus: The Case of India
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Is CAPM Dead in Emerging Market? – Indian Evidence

--T G Saji

This paper discusses the empirical validity of Capital Asset Pricing Model (CAPM) in an emerging market context. Covering the recent global financial period, the study aims to investigate the relation between stock returns and market betas in India under a cross-sectional regression framework. The regression results find insignificant inverse risk (beta)-return relation during the overall period of the study. During sub-period analysis also it finds that risk-return relationship is significant only at the time of bull movements in the market. The intercept parameter is positive and significantly different from zero which shows the dominance of non-systematic factors contributing variations to stock returns in India. The study ultimately concludes that CAPM cannot be a suitable descriptor of asset pricing in emerging markets now.

Article Price : Rs.50

The Impact of Intellectual Capital on Bank Risk: Evidence from Indian Banking Sector

--Santanu Kumar Ghosh and Santi Gopal Maji

This study is a modest attempt to examine the impact of Intellectual Capital Efficiency (ICE) and its components—Human Capital Efficiency (HCE) and Structural Capital Efficiency (SCE)—on credit and insolvency risks of Indian commercial banks during the period 1998-99 to 2011-12. Employing panel data technique, the study finds that IC is inversely associated with credit risk. Among the components, HCE is significantly and negatively related to credit risk. The study also finds greater influence of ICE and HCE on credit risk of public sector banks than that of private sector banks. It is also evident that large banks are more efficient in utilizing IC in managing credit risk, while small banks depend on capital adequacy ratio. Regarding the influence of IC on banks’ insolvency risk, the present effort fails to arrive at any definite conclusion.

Article Price : Rs.50

Financial Distress Prediction: A Comparative Study of Solvency Test and Z-Score Models with Reference to Sri Lanka

--Chandana Gunathilaka

This paper examines the discriminant power of the solvency test of the Sri Lankan Companies Act in identifying insolvency of firms and whether the Z-score models of Altman and Springate appropriately predict financial distress in Sri Lanka. The study observes a sample of 82 firms listed on Colombo Stock Exchange across different sectors, over a period of five years from 2008 to 2012. It analyzes company financials using independent sample t-tests and multivariate discriminant analysis. The study finds that the solvency test does not discriminate solvent and insolvent firms meaningfully. The Altman’s and Springate’s Z-score models yield similar predictive power. In particular, Altman’s Z-model shows a higher degree of discriminant power in identifying financially distressed firms, at least one year prior to the distress. The market value and book value contribute similarly between Z-models. The study indicates the level of care required in solvency test-based decision making.

Article Price : Rs.50

Gold Price, Stock Price and Exchange Rate Nexus: The Case of India

--Srinivasan P and Karthigai Prakasam

The paper investigates the causal nexus between gold price, stock price and exchange rate in India using Autoregressive Distributed Lag (ARDL) bounds testing approach and Granger causality test on monthly time series data for the period from June 1990 to April 2014. The results reveal that gold price and stock price tend to have long-run relationship with exchange rate in India. Besides, there is no evidence of stable long-run cointegration relationship between stock price and gold price in India. The findings also indicate that there exists no causality from gold price to stock price or vice versa in the short run. It can thus be concluded that domestic gold price does not contain any significant information to forecast stock prices in India.

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 banks 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.