• Title/Summary/Keyword: Financial Crisis of 2007

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Co-movements between VIX and Emerging CDSs: A Wavelet Coherence Analysis

  • Kang, Sang Hoon
    • Journal of the Korean Data Analysis Society
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    • v.20 no.6
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    • pp.2771-2779
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    • 2018
  • The recent financial crises cause the co-movement and transmit the risk across different markets and assets. It is well known that market fear affects the quality of credit in the financial markets. In this context, this study examines the co-movement between the volatility index (VIX) of the Chicago Board Options Exchange (CBOE), or VIX, and six emerging countries' credit default swaps (CDSs), by implementing wavelet coherence. Our research aims at revealing whether the VIX can be used to hedge against the bubble behavior of the CDS market in different investment holding periods (short-run, medium-run, and long-run), as well as whether either market can be used to manage and hedge overall market downside risks. The wavelet coherence results show a high degree of co-movement between the VIX and CDS during the 2007-2009 global financial crisis, across the 16-64 weeks' frequency band. In addition, we observe that the positive correlation between the VIX and the CDS markets, implying that the market turmoil intensifies the co-movement between the VIX and CDS markets.

An Analysis for the Changing Trends of Residential Environment Based on the Change of Residents in Rural Areas (농촌거주자의 특성변화에 따른 농촌주거환경의 변화경향 분석)

  • Choi, Myung-Kyu
    • Journal of the Korean Institute of Rural Architecture
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    • v.14 no.3
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    • pp.9-16
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    • 2012
  • Both internally and externally environmental changes surround the rural areas such as rapid growth of the early-retired employee under the WTO, the Asian financial crisis in 1997, and the financial crisis in 2007 brought about much transformation in our rural residential environment. According to this changes and demands, the rural areas have been transformed from the area for farmer to the area for farmer and non farmer, that is, peoples that to leave the city to go back to farm or return to home village. Of this time, there needs a change in rural development policies which can make the urban residents migrate and settle in the rural areas as they are naturally embracing the rural life according to the social background and demand. In this point of view, we attempted, in this paper, to survey and analyze the changing trends of residential environment following the spatial composition with house types and rural villages in rural areas. The result of this study will be expected to be a reference for the direction of desirable residential environment in rural areas.

Corporate Default Prediction Model Using Deep Learning Time Series Algorithm, RNN and LSTM (딥러닝 시계열 알고리즘 적용한 기업부도예측모형 유용성 검증)

  • Cha, Sungjae;Kang, Jungseok
    • Journal of Intelligence and Information Systems
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    • v.24 no.4
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    • pp.1-32
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    • 2018
  • In addition to stakeholders including managers, employees, creditors, and investors of bankrupt companies, corporate defaults have a ripple effect on the local and national economy. Before the Asian financial crisis, the Korean government only analyzed SMEs and tried to improve the forecasting power of a default prediction model, rather than developing various corporate default models. As a result, even large corporations called 'chaebol enterprises' become bankrupt. Even after that, the analysis of past corporate defaults has been focused on specific variables, and when the government restructured immediately after the global financial crisis, they only focused on certain main variables such as 'debt ratio'. A multifaceted study of corporate default prediction models is essential to ensure diverse interests, to avoid situations like the 'Lehman Brothers Case' of the global financial crisis, to avoid total collapse in a single moment. The key variables used in corporate defaults vary over time. This is confirmed by Beaver (1967, 1968) and Altman's (1968) analysis that Deakins'(1972) study shows that the major factors affecting corporate failure have changed. In Grice's (2001) study, the importance of predictive variables was also found through Zmijewski's (1984) and Ohlson's (1980) models. However, the studies that have been carried out in the past use static models. Most of them do not consider the changes that occur in the course of time. Therefore, in order to construct consistent prediction models, it is necessary to compensate the time-dependent bias by means of a time series analysis algorithm reflecting dynamic change. Based on the global financial crisis, which has had a significant impact on Korea, this study is conducted using 10 years of annual corporate data from 2000 to 2009. Data are divided into training data, validation data, and test data respectively, and are divided into 7, 2, and 1 years respectively. In order to construct a consistent bankruptcy model in the flow of time change, we first train a time series deep learning algorithm model using the data before the financial crisis (2000~2006). The parameter tuning of the existing model and the deep learning time series algorithm is conducted with validation data including the financial crisis period (2007~2008). As a result, we construct a model that shows similar pattern to the results of the learning data and shows excellent prediction power. After that, each bankruptcy prediction model is restructured by integrating the learning data and validation data again (2000 ~ 2008), applying the optimal parameters as in the previous validation. Finally, each corporate default prediction model is evaluated and compared using test data (2009) based on the trained models over nine years. Then, the usefulness of the corporate default prediction model based on the deep learning time series algorithm is proved. In addition, by adding the Lasso regression analysis to the existing methods (multiple discriminant analysis, logit model) which select the variables, it is proved that the deep learning time series algorithm model based on the three bundles of variables is useful for robust corporate default prediction. The definition of bankruptcy used is the same as that of Lee (2015). Independent variables include financial information such as financial ratios used in previous studies. Multivariate discriminant analysis, logit model, and Lasso regression model are used to select the optimal variable group. The influence of the Multivariate discriminant analysis model proposed by Altman (1968), the Logit model proposed by Ohlson (1980), the non-time series machine learning algorithms, and the deep learning time series algorithms are compared. In the case of corporate data, there are limitations of 'nonlinear variables', 'multi-collinearity' of variables, and 'lack of data'. While the logit model is nonlinear, the Lasso regression model solves the multi-collinearity problem, and the deep learning time series algorithm using the variable data generation method complements the lack of data. Big Data Technology, a leading technology in the future, is moving from simple human analysis, to automated AI analysis, and finally towards future intertwined AI applications. Although the study of the corporate default prediction model using the time series algorithm is still in its early stages, deep learning algorithm is much faster than regression analysis at corporate default prediction modeling. Also, it is more effective on prediction power. Through the Fourth Industrial Revolution, the current government and other overseas governments are working hard to integrate the system in everyday life of their nation and society. Yet the field of deep learning time series research for the financial industry is still insufficient. This is an initial study on deep learning time series algorithm analysis of corporate defaults. Therefore it is hoped that it will be used as a comparative analysis data for non-specialists who start a study combining financial data and deep learning time series algorithm.

Strategic Alliances and Productivity in Air Transport Industry (항공운송산업의 전략적 제휴와 생산성에 대한 연구)

  • Yeo, Kyu-Hun;Lee, Young-Soo
    • Journal of the Korean Society for Aviation and Aeronautics
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    • v.15 no.4
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    • pp.131-141
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    • 2007
  • This paper identifies the productivity in the Global Air Transport Industry for the period of 1995-2001 by testing the Total Factor Productivity with tonqvist method. Based on panel data from 20 major international airline corporations which formed global strategic alliances, we find alliances make a considerably significant contribution to productivity increases. We also find that total factor productivity rate changed surprisingly in Air Transport Industry between pre- and post-Asian financial crisis period.

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How to Use Financial Derivatives Wisely - A case study of KIKO -

  • Shin, Jungsoon;Lim, Yejin
    • Agribusiness and Information Management
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    • v.4 no.1
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    • pp.24-31
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    • 2012
  • This case study investigates the KIKO currency option that has been a social issue in recent years among developing countries, especially Korea, where the financial derivatives market is in a state of rapid growth. The forward transaction which becomes a basis of derivatives is intended to hedge risks that may be caused by a future change in asset prices. Although it originates from a simple form of agricultural transactions, there currently exists a variety of derivatives in more sophisticated forms. In the Korean agricultural industry, the need to use such derivatives is great, as there is a huge risk of price fluctuation in agricultural products due to frequent adverse weather. In addition, many developing countries with export-led industrial structures similar to Korea's, of necessity must resort to currency hedging as a method of reducing relevant risk. However, in most cases, the lack of understanding about financial derivatives results in an inappropriate application of these derivatives. The KIKO in this study represents such cases. Since 2007, KIKO has been sold in Korea to many small- and medium-sized export companies for the purpose of currency hedging when the exchange rate between the Korean won and the U.S. dollar was in a downward spiral. The main focus of this study is a case which is most representative of KIKO. As inflation rapidly increased during the financial crisis in the U.S. at the end of 2007, derivatives became a hot issue in the courts rather than in the financial markets. This case study investigates what KIKO and the fierce legal debates over it imply, from the perspective of the option of value evaluation in order to suggest not only a direction in which companies can utilize financial derivatives, but also a roadmap for the future derivatives market.

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The Relationship between Competition and Borrowers Indebtedness: Empirical Evidence from South Asia

  • MERAJ, Muhammad
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.12
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    • pp.39-50
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    • 2021
  • We investigate competition and its impact on borrowers' indebtedness (BI) in South Asian microfinance. Our empirical investigations are based on a comprehensive panel dataset of 355 MFIs located in seven countries in South Asia. The empirical results revealed that microfinance in South Asia is imperfectly competitive and the existing industry shows a monopolistic competition during the period under consideration. Also, the competition increased after the global financial crisis (GFC) in 2007-08 which implies that microfinance uses hostile lending behavior through the adverse selection that is highly risky and it can induce repayment crisis. The empirical findings also show that increased competition has significant negative effects on borrowers' indebtedness, particularly in large-scale and regulated microfinance organizations (MFIs). Instead of using equity financing, debt financing could be a better option. Finally, we find that while competition seems to have some positive effects in economic discourse by channeling technological improvements in products and services, its negative effects in microfinance outweigh the benefits over costs, particularly in poverty-stricken nations. The findings are helpful for the policymakers, microfinance industry, investors, borrowers, and Central Bank of South Asian markets.

Developing an Investment Framework based on Markowitz's Portfolio Selection Model Integrated with EWMA : Case Study in Korea under Global Financial Crisis (지수가중이동평균법과 결합된 마코위츠 포트폴리오 선정 모형 기반 투자 프레임워크 개발 : 글로벌 금융위기 상황 하 한국 주식시장을 중심으로)

  • Park, Kyungchan;Jung, Jongbin;Kim, Seongmoon
    • Journal of the Korean Operations Research and Management Science Society
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    • v.38 no.2
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    • pp.75-93
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    • 2013
  • In applying Markowitz's portfolio selection model to the stock market, we developed a comprehensive investment decision-making framework including key inputs for portfolio theory (i.e., individual stocks' expected rate of return and covariance) and minimum required expected return. For estimating the key inputs of our decision-making framework, we utilized an exponentially weighted moving average (EWMA) which places more emphasis on recent data than the conventional simple moving average (SMA). We empirically analyzed the investment results of the decision-making framework with the same 15 stocks in Samsung Group Funds found in the Korean stock market between 2007 and 2011. This five-year investment horizon is marked by global financial crises including the U.S. subprime mortgage crisis, the collapse of Lehman Brothers, and the European sovereign-debt crisis. We measure portfolio performance in terms of rate of return, standard deviation of returns, and Sharpe ratio. Results are compared with the following benchmarks : 1) KOSPI, 2) Samsung Group Funds, 3) Talmudic portfolio based on the na$\ddot{i}$ve 1/N rule, and 4) Markowitz's model with SMA. We performed sensitivity analyses on all the input parameters that are necessary for designing an investment decision-making framework : smoothing constant for EWMA, minimum required expected return for the portfolio, and portfolio rebalancing period. In conclusion, appropriate use of the comprehensive investment decision-making framework based on the Markowitz's model integrated with EWMA proves to achieve outstanding performance compared to the benchmarks.

European Globalisation Adjustment Fund (EU의 세계화조정기금 연구)

  • Lee, Ki Hwan;Kim, Hee Kil
    • International Area Studies Review
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    • v.16 no.1
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    • pp.303-325
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    • 2012
  • This paper is to provide an analysis on the European Globalisation Adjustment Fund(EGF) program and the study of European Member State. Established in December 2006, the EGF was originally intended to help workers who were affected by redundancies resulting from globalisation. The EGF at present also provides support to workers who were made redundant as a direct result of the global financial and economic crisis. In general, EGF measures are defined as assistance actions for job search, training, upskilling, outplacement, business start-up, etc. The paper focuses on the cases implemented by EGF for redundant workers harmed by globalisation and by a direct result of the global financial & economic crisis, and also focuses on the statistical portrait of the EGF 2007-2011. In addition, the paper provides criteria & implications of the EGF in the changing international economy. Finally, we could learn the importance of the EGF program through the analysis in this paper. With criteria & implications of the EGF program, the effective application to keep workers in employment or help them back into jobs would help us get over difficulties.

Stock market stability index via linear and neural network autoregressive model (선형 및 신경망 자기회귀모형을 이용한 주식시장 불안정성지수 개발)

  • Oh, Kyung-Joo;Kim, Tae-Yoon;Jung, Ki-Woong;Kim, Chi-Ho
    • Journal of the Korean Data and Information Science Society
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    • v.22 no.2
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    • pp.335-351
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    • 2011
  • In order to resolve data scarcity problem related to crisis, Oh and Kim (2007) proposed to use stability oriented approach which focuses a base period of financial market, fits asymptotic stationary autoregressive model to the base period and then compares the fitted model with the current market situation. Based on such approach, they developed financial market instability index. However, since neural network, their major tool, depends on the base period too heavily, their instability index tends to suffer from inaccuracy. In this study, we consider linear asymptotic stationary autoregressive model and neural network to fit the base period and produce two instability indexes independently. Then the two indexes are combined into one integrated instability index via newly proposed combining method. It turns out that the combined instability performs reliably well.

Empirical Analysis of Governmental R&D Support to Firms during Economic Crisis (2008-2009) (경제불황('08-'09)하의 기업에 대한 정부 R&D 지원 효과 실증 분석 연구)

  • Choi, Dae Seung;Kim, Chi Yong
    • Journal of Korea Technology Innovation Society
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    • v.18 no.2
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    • pp.264-291
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    • 2015
  • This research is to empirically analyze the effects of governmental policy including R&D subsidiary and tax reduction, which are both direct and indirect financial supports, during the examination period (2007~2009). The analysis was based on 2,751 firms that received governmental support via both R&D subsidiary and tax reduction with 7,038 panel events during the economic recession (2008~2009) and found that governmental support drives R&D investment of firms during the recession. The contribution of this research is that investigation of policy effectiveness categorized by firm sizes, particularly during the economic crisis. The result of the study is that during the recession, large firms had more elasticity increase towards tax reduction whereas smaller firms and ventures had it towards direct financial subsidiary. The elasticity increase of both large and small firms was in positive association with firms' R&D investment. The result indicates that government support obviously has positive influence on R&D investment of firms during the crisis, even enforcing the investment.