Residential mortgage rates in Hong Kong have fallen to a historic low level since late 2004, largely because of severe competition and the prevailing exceptionally low funding cost of the banks. Because of the abundance of liquidity in the banking system, HIBOR is at an abnormally deep discount...

Under the framework of Basel II, banks which adopt the internal ratings-based approach will be required to compare their actual provisions with expected losses. Any shortfall (i.e., the expected loss exceeds the provision) should be deducted from capital of the bank. It is therefore important to...

The empirical results show that after the introduction of the three refinements to the Linked Exchange Rate system in May 2005 the Hong Kong dollar follows a bounded process that is consistent with a fully credible exchange rate band. The bounded process will limit the movements of the exchange...

This paper proposes a path-dependent approach for estimating maximum appreciations of the renminbi expected by the market based on first-passage-time distributions. Using market data of the renminbi spot exchange rates, non-deliverable forward rates and currency option prices from 21 July 2005...

This paper proposes a path-dependent approach for estimating realignment probabilities of targeted exchange rates based on first-passage-time distributions instead of the commonly used path-independent approach. We consider that path dependency is an intrinsic characteristic of realignment risk...

This paper assesses whether agency ratings and market-based default risk measures are consistent for East Asian banks during the period 1996 to 2006. While the market-based measures are broadly consistent with the credit rating assessments for banks in developed economies, the discrepancy...

The theoretical prediction of target exchange rates expects mean reversion of the exchange rates. This paper presents a model for valuing European foreign exchange options, in which the forward foreign exchange rate follows a mean-reverting lognormal process. The mean-reverting process has...

Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks, in particular US-dollar funding shortages, prompting central banks around the world to adopt unprecedented policy...

This paper develops a model to identify the major determinants of a bank's profit, and the general level of profitability of a banking market. It found that in Hong Kong's case, market structure, such as market concentration and market shares of banks, is not a major contributory factor. Cost...

This working paper examines the degree of collusion in the banking sector of Hong Kong based on the conjectural variation approach. The results suggest that banks in Hong Kong operated in a competitive fashion in the loan market during the period 1991-2002 with no significant sign of collusion...