Empirical findings and theoretical studies suggest that firms adjust toward time-varying target leverage ratios. This paper studies the performances of the default probabilities generated from two structural credit risk models (one with time-dependent leverage ratios and one with constant target...

This paper develops a simple model based on an options approach to measure provisions covering expected losses of collateralised retail lending due to default. The measurement of provisions against expected losses of retail lending secured by collateral is important for improving the capital...

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...

This paper presents a benchmarking model for validation of default probabilities of listed companies for Basel II purposes. The model is based on the recent studies on the predictive capability of structural credit risk models. Benchmark ratings and one-year default probabilities are assigned to...

This paper studies the discriminatory power and calibration quality of the structural credit risk models under the 'exogenous default boundary' approach including those proposed by Longstaff and Schwartz (1995) and Collin-Dufresne and Goldstein (2001), and 'endogenous default boundary' approach...

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...

Using the stochastic frontier approach and a panel dataset of retail banks, this paper assesses the cost efficiency of the banking sector in Hong Kong. The average cost inefficiency during the period 1992-2005 is found to be about 15% to 29% of observed total costs, which is largely in line with...

This paper analyzes the evolution of competitive conditions of Hong Kong's banking industry based the Panzar-Rosse approach and a panel dataset of retail banks in Hong Kong for the period 1991-2005. Relaxation of bank regulations and bank consolidations have changed substantially the banking...

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 study assesses the effectiveness and drawbacks of maximum loan-to-value (LTV) ratios as a macroprudential tool based on Hong Kong's experience and econometric analyses of panel data from 13 economies. The tool is found to be effective in reducing systemic risk stemming from the...