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...

While the US dollar and Japanese yen are considered as safe-haven currencies, both their sovereign credit default swap (CDS) spreads and exchange rate have varied in a wide range since late 2007. This raises the question of interconnectivity between the anticipated sovereign credit risk and the...

This paper examines the term structures of default probabilities that are generated by the Collin-Dufresne and Goldstein model and a dynamic-leverage-ratio model. The dynamic-leverage-ratio model is capable of producing term structures of default probabilities which are consistent with some...

In this paper we propose a simple and easy-to-use method for computing accurate estimate (in closed form) of the double barrier hitting time distribution of a mean-reverting lognormal process, and discuss its application to pricing exotic options whose payoffs are contingent upon barrier hitting...

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

Based upon the Fourier series expansion, we propose a simple and easy-to-use approach for computing accurate estimates of Black-Scholes double barrier option prices with time-dependent parameters. This new approach is also able to provide tight upper and lower bounds of the exact barrier option...

In this paper we present a Lie-algebraic technique for the valuation of multi-asset financial derivatives with time-dependent parameters. By exploiting the dynamical symmetry of the pricing partial differential equations of the financial derivatives, the new method enables us to derive...