In this brief research article, we consider the financial modelling of the process of mortgage loan securitization that has been a root cause of the ongoing Subprime Mortgage Crisis (SMC). In particular, we suggest a Levy process-driven model of bank leverage profit that arises from the...

A topical issue in financial economics is the development of a stochastic dynamic model for bank behaviour. Under the assumption that the loan market is imperfectly competitive, we investigate the evolution of banking items such as loans, provisions for loan losses and deposit withdrawals,...

The 2007–2008 US subprime mortgage crisis evolved into a financial crisis that negatively affected many economies in the world and was afterwards widely referred to as the global financial crisis. Since the beginning of this financial crisis of 2008–2009, South Africa experienced a...

In this article, we obtain numerical results involving new Basel III liquidity regulation. More specifically, we compute the net stable funding ratio in accordance with the prescripts of the proposed banking rules. In this regard, we investigate the effects of shareholder cash flow rights on the...

We address the impact of speculative mortgage funding on the pricing of subprime residential mortgage loans (measured by risk premia) and securities backed by these mortgages (measured by ABX.HE indices). In this regard, we make use of techniques involving multivariate Vector Autoregressive...

Basel III introduces a leverage ratio that is expressed as the quotient of Tier 1 capital and a class of total unweighted assets. In this article, we use BankScope data to study Class I banks that have Tier 1 capital and total unweighted assets in excess of US $4 and 100 billion, respectively,...

The primary objective of this paper is to add to the growing debate about the impact of the Basel II Capital Accord (see Base II, June 2004) on the functioning of internationally active banks. A technical contribution is made to this discussion by constructing a stochastic continuous-time model...

In this article, we use actuarial methods to solve a nonlinear stochastic optimal liquidity risk management problem for subprime originators with deposit inflow rates and marketable securities allocation as controls. The main objective is to minimize liquidity risk in the form of funding and...