In order to cope with daily foreign currency exchange payments or trades and avoid liquidity crisis, central banks need to maintain the liquidity of foreign exchange reserves. In this paper, we develop a Foreign Exchange Reserves Liquidity Management (FERLM) model based on stochastic process by...

In this article, we take the funding liquidity risk into account when determining the optimal liquidity reserve ratio for a commercial bank. A simple continuous-time model is developed, and a discrete-time model is built as a benchmark. We find that compared with the continuous-time model, the...

This article investigates how the jump in the exchange rate and risky asset can affect the central bank's foreign management. We find that the jump in the exchange rate has a positive impact on the need for the risky asset, whereas the jump in the risky asset has a negative impact. However, the...

Owing to fluctuations in the financial markets from time to time, the rate [lambda] of Poisson process and jump sequence {Vi} in the Merton's normal jump-diffusion model cannot be expected in a precise sense. Therefore, the fuzzy set theory proposed by Zadeh [Zadeh, L.A., 1965. Fuzzy sets....

This article follows the framework of Klein (1996) to present an improved method of pricing vulnerable options under jump diffusion assumptions about the underlying stock prices and firm values which are appropriate in many business situations. In contrast to Klein's (1996) model, jumps allow...

This paper investigates the timing of buying and selling in supply chains with mergers consisting of suppliers and manufacturers whose costs and revenues are uncertain, respectively. Based on the real option theory, we recognize the option value of waiting for a better trading timing in a...

Credit risk management is important for the investors in practical risk management. This paper aims to discuss how to evaluate the default risk of bond portfolios by applying extreme value theory. Based on Black and Cox default approach, we propose a novel threshold default model and use extreme...

Purpose– After loan interest rate upper limit deregulation in October 2004, the financing environment in China changed dramatically, and the banks were eligible for risk compensation. The purpose of this paper is to focus on the influence of the loan interest rate liberalization on firms’...