FFA Working Papers, 2020 (vol. 2)

Original contributions

Recovery process optimization using survival regression

Jiří Witzany, Anastasiia Kozina

FFA Working Papers 2:004 (2020)1201  

The goal of this paper is to propose, empirically test and compare different logistic and survival analysis techniques in order to optimize the debt collection process. This process uses various actions, such as phone calls, mails, visits, or legal steps to recover past due loans. We focus on the soft collection part, where the question is whether and when to call a past-due debtor with regard to the expected financial return of such an action. We propose using the survival analysis technique, in which the phone call can be compared to a medical treatment, and repayment to the recovery of a patient. We show on a real banking dataset that, unlike...

The impact of renewable energy and technology innovation on Chinese carbon dioxide emissions

Janda Karel, Binyi Zhang

FFA Working Papers 2:003 (2020)608  

Understanding the influencing factors of carbon dioxide emissions is an essential prerequisite for policy makers to maintain sustainable low-carbon economic growth. Based on the Autoregressive Distributed Lag Model (ARDL) and Vector Error Correction Model (VECM), we investigate the relationships among economic growth, carbon emission, financial development, renewable energy consumption and technology innovation for China for the period 1965-2018. Our empirical results confirm the presence of a long run relationship among the underlying variables. Our long run estimates show that financial development has negatively significant impacts on carbon emissions,...

The impact of low interest rates on banks’ non-performing loans

Matěj Maivald, Petr Teplý

FFA Working Papers 2:002 (2020)1324  

The paper examines the impact of a low interest rate environment on banks’ credit risk measured by the non-performing loan (NPL)/total loans ratio. We analyse a unique sample of annual data on 823 banks from the Eurozone, Denmark, Japan, Sweden, and Switzerland for the 2011-2017 period, which also covers the period of zero and negative rates. We conclude that after 1 year of low interest rates, the NPL ratio increases. Our results are mostly consistent with the findings of previous research, and the majority of differences can be explained by the changes in the economic environment during the period with low interest rates.

Stressing of Migration Matrices for IFRS 9 and ICAAP Calculations

Jiří Witzany

FFA Working Papers 2:001 (2020)2172  

Rating transition matrices have become a workhorse of the IFRS 9 expected credit loss and ICAAP stress test modelling. The standard method to stress a through-the-cycle transition matrix is based on a single factor Gaussian model with a correlation parameter that is usually estimated on the level of a product pool. The goal of the paper is to generalize the model allowing for more general distributional assumptions and to test empirically the sensitivity of the results with respect to these assumptions and different possible approaches to the correlation parameter estimation. We are not aware of any such empirical study in the literature. The results...