Several central banks in emerging economies are concerned with excessive volatility in foreign exchange markets and would like to control the direction and speed with which the value of their currency changes. Historically, currency market interventions have consisted of using foreign exchange...

This paper proposes a new, individual measure of market risk, denoted as the individually acceptable loss (IAL). This measure can be used by portfolio managers in order to better meet the individual profiles of their non-professional clients, including phsychological traits. It can be easily...

This paper focuses on the attitude of non-professional investors towards financial losses and their decisions on wealth allocation, and how these change subject to behavioral factors. Our contribution concerns the integration of behavioral elements into the classic portfolio optimization....

Despite the financial sector liberalization and openness that started in the earlier 90’s and significant macroeconomic development as well as increasing inflow of capital toward the region, there is not any evidence of the reduction of interest rates as well as banks’ profits in Latin...

Regulators in emerging markets are increasingly curtailing the practice of foreigncurrency lending. In such a move Turkish regulatory authorities banned foreign currencylending to households in 2009. This paper examines the evolution of financial dollarization inTurkey in the 2002–2009 period...

Dollar-denominated deposits and loans could increase financial fragility in emerging market banking systems. This currency mismatch does not only increase banks' currency risk when the proportion of dollar-denominated loans with respect to local-denominated loans increases but also it increases...

In highly dollarized banking systems, the high level of foreign currency assets or liabilities on banks' balance sheets may create a currency mismatch risk, which could lead to bank failures when faced with sudden exchange rate movements. Central banks in such economies have to adjust their...

Banks in highly dollarized economies face risks that significantly affect their ability to perform their financial intermediation role. In these economies, dollarization plays a dual role: on the one hand, it provides a hedging instrument protecting the value of savings; on the other hand, it...

This paper studies the impact of loss aversion on decisions regarding the allocation of wealth between risky and risk-free assets. We use a Value-at-Risk portfolio model with endogenous desired risk levels that are individually determined in an extended prospect theory framework. This framework...

This paper studies the attitude of non-professional investors towards financial losses and their decisions concerning wealth allocation among consumption, risky, and risk-free financial assets. We employ a two-dimensional utility setting in which both consumption and financial wealth...