Dec'18
The IUP Journal of Financial Risk Management
Focus
The first paper' "The Impact of Basel Norms on the Capital and Risk Behavior of Indian Banks"' by Samriti Kapoor and Mandeep Kaur' talks about the role of bank regulations in stabilizing the banking system.
Using yearly data of 42 scheduled commercial banks' comprising 25 public sector banks and 17 private sector banks of India' for the period 2006 to 2016' the study examines the impact of Basel norms on the capital and risk behavior of Indian banks. The Three-Stage Least Square (3SLS) regression is used to study the linkage between risk and capital. For seeing the effect of regulation' dummy variable is used. The study reports positive effect of Basel norms on the capital level of Indian banks.
Futures market provides hedging and price discovery for the participants. It provides the facility of margin trading' which magnifies the return of trader if his price prediction is correct. Thus' trading in futures is advantageous. Using agricultural commodities of guar seed' chana' soy oil and mustard seed' the next paper' "Volatility Transmission Between Futures and Cash Markets of Indian Agri Commodities: An Empirical Study"' by Mehak Arora and Ramesh Chander' finds the efficiency of commodity market and spillover effects in the spot and futures market in Indian commodity market. The data of NCDEX closing prices of commodities for the period April 2012 to March 2017 is used. The econometric tools used in the study are Augmented Dickey-Fuller (ADF) test' Johansen cointegration test' Vector Error Correction Model (VECM)' and GARCH and EGARCH methodology. The study reports better price discovery and spillover from futures to spot market.
There are various participants such as farmers' commodity traders and other stakeholders in agricultural commodities market. Though their interests may be different' while trading with each other' every one of them is exposed to price risk. The last paper' "Causality of Pepper Spot and Futures Prices at Indian Commodity Market"' by A N Vijayakumar' tries to capture the uncertainty of trading with an agriculture commodity' i.e.' black pepper. Using spot and futures prices data of black pepper from July 7' 2017 to March 20' 2018' the study examines the interrelationship between spot and futures prices. Regression analysis and Granger causality tests are used as methodological tools to arrive at meaningful results. Spot price does affect the futures price of black pepper' but unidirectional causality is found from futures market to spot market. The study indicates the efficiency of futures market in price discovery' which is in line with the objective of future exchange.
Consulting Editor
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| Article | Price (₹) | ||
| The Impact of Basel Norms on the Capital and Risk Behavior of Indian Banks |
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| Volatility Transmission Between Futures and Cash Markets of Indian Agri Commodities: An Empirical Study |
100
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| Causality of Pepper Spot and Futures Prices at Indian Commodity Market |
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The Impact of Basel Norms on the Capital
The present study is an attempt to empirically examine the impact of Basel Accord regulatory guidelines on the capital and risk behavior of Indian banks. It aims to assess how Indian banks adjust capital and risk under capital regulation. The study uses simultaneous equation modeling with Three-Stage Least Square (3SLS) regression to study the endogenous relationship between risk and capital. A regulatory dummy variable has been included as a proxy for Basel norms regulation. The data of public and private sector banks operating in India over a period from 2006 to 2016 is used for the present study. The results evidently reveal significant impact of Basel norms on the capital and risk behavior of Indian banks. The study found a positive impact of Basel norms on the capital level of Indian banks. The results also highlight the negative relationship between capital and risk in the context of Indian banks.
Volatility Transmission Between Futures and Cash Markets of Indian Agri Commodities: An Empirical Study
Future contracts in commodity market with limited maturities are used primarily to hedge risk in underlying commodity price and/or to enlarge potential to make profit taking advantage of price movements of the underlying instead of buying or selling of the commodity in the cash market. Based on daily price movements on the NCDEX from April 2012 through March 2017' this paper is an endeavor to scrutinize the efficiency of commodity market in India and unpredictable spillover effects in the spot and futures market with regard to agri commodities-guar seed' chana' soy oil and mustard seed. The results of the study are based on Augmented Dickey-Fuller (ADF) test' Johansen cointegration test' Vector Error Correction Model (VECM)' and GARCH and EGARCH methodology. The results of the study indicate that long-term equilibrium relationship exists between the spot and the futures price of sample commodities. The result also indicates that the commodity futures market effectively serves the price discovery platform for the underlying spot market thus validating spillover of information from futures to spot markets. The results reported also point to the volatility transmission across the markets per se' however' it is the inverse transmission (from the futures market to the spot market) that was noticed to be more rigorous and robust. The findings reported have wider implications for the policy makers to address stress in the farm sector' facilitating farmers' participation in the agri commodities market to supplement income' as well for seasoned market participants in strategizing trade in agri commodities.
Causality of Pepper Spot and Futures Prices at Indian Commodity Market
The futures contract plays an important role in price discovery and risk management. The contracts prices have an impact on spot prices and are also used for risk management by hedging. This paper reviews the casual relationship between black pepper spot and futures prices through regression and Granger causality technique. This study finds a unidirectional relationship between pepper futures prices and spot prices.