The Global Financial Crisis triggered a revision of the VaR based Basel II market risk framework to address extreme events. The revised VaR methodology remains unchanged under Basel III, however ongoing studies to evaluate VaR continue in academia and by the Basel Committee. In this paper, we assess VaR models for Australian banks over the past ten years and provide statistical evidence of their effectiveness. Results indicate that one year parametric and historical models produce better measures of VaR than models with longer time frames. VaR estimates produced using Monte Carlo simulations show very low percentage of violations but higher level of violations. VaR estimates produced by the ARMA GARCH model show relatively high percentage of violations, however, the level of violations is quite low. Our findings shed light on the rationale and design of the revised Basel II VaR methodology which has also been adopted under Basel III.
Unlike US and Continental European jurisdictions, Australian monetary policy announcements are not followed promptly by projections materials or comprehensive summaries that explain the decision process. This information is disclosed two weeks later when the explanatory minutes of the Reserve Bank board meeting are released. This paper is the first study to exploit the features of the Australian monetary policy environment in order to examine the differential impact of monetary policy announcements and explanatory statements on the Australian interest rate futures market. We find that both monetary policy announcements and explanatory minute releases have a significant impact on the implied yield and volatility of Australian interest rate futures contracts. When the differential impact of these announcements is examined using the full sample, no statistically significant difference is found. However, when the sample is partitioned based on stable periods and the Global Financial Crisis, a differential impact is evident. Further, contrary to the findings of Kim and Nguyen (2008), Lu et al. (2009), and Smales (2012a), the response along the yield curve, is found to be indifferent between the short and medium terms.
Acknowledgments: We wish to thank Jim Psaros and two anonymous referees for helpful comments.
AbstractThirteen percent of own-company trades by directors do not meet the ASX requirement of reporting within 5 business days, while seven percent are not reported within 14 business days as required by the Corporations Act. Such breaches of reporting regulations are particularly important given that directors tend to purchase (sell) shares when the price is low (high), thereby achieving abnormal returns. These abnormal returns are highest for purchases in resource companies. Ignoring transaction costs outsiders can achieve abnormal returns by imitating directors' trades. Directors avoid small but statistically significant losses in the period between selling shares and these trades being reported to the market.
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