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NEWSLETTER of April 14, 2023

The following content has been added at finexpert:

Studies > Corporate Finance

According to German banks, the difficult economic situation and high energy prices will have a noticeable impact on lending and also lead to rising costs for borrowers. Thus, 59 percent of the 120 bank managers surveyed for the "EY Credit Market Study" describe the economic situation in Germany as poor - only four percent as good or very good. And 86 percent consider loan defaults likely due to the difficult economic environment. The situation is aggravated by high energy prices, which 67 percent of respondents believe will lead to loan defaults. Against this backdrop, the proportion of banks planning to grant more loans is falling dramatically compared with the previous year: from 61 percent to 14 percent. Currently, 67 percent of banks are planning to scale back their lending. >more

Studies > M & A

As transactions remain essential for growth in most industries, the players who come out ahead from a period of volatility and uncertainty will have one trait in common: boldness. This report captures the sentiment and insights from corporate and private equity firms in the M&A market and projects M&A trends for the next 12 months. >more

Studies > Macro

Deutsche Bank Research
The IMF has reduced its growth forecast for the global economy by 0.1 pp. to 2.8% (2023) and 3.0% (2024) respectively due to the recent turbulence in the banking sectors of some industrialized countries and persistently high inflation rates, which could make higher interest rates necessary for longer. Global inflation is expected to moderate slightly this year from 8.7% (2022) to 7.0%. In view of weaker growth in the labor force potential, geo-economic fragmentation (Brexit, US-China conflict, Russian invasion of Ukraine) and weakening supply-side reforms, the IMF expects a global growth rate of just 3.0% in 2028. This would slow medium-term growth by almost 2 percentage points within two decades. >more

Studies > Macro

Bank for International Settlements
Financial markets extended previous gains during the review period. As inflation readings gradually fell and the pace of policy tightening slowed early in the period, financial conditions eased and risky asset valuations generally rose on the back of perceptions of declining risks. Expectations of significant rate cuts in the near term appeared to firm up, despite cautious central bank communication about the policy outlook. The US dollar depreciated further, lending additional support to assets in emerging market economies (EMEs). Towards the end of the period, however, market developments proved sensitive to news that challenged investors' sanguine attitude. Investors' expectations about future policy rate paths stood in contrast to central bank communications. >more

Research Papers > Corporate Finance

Mark J. Johnson, Itzhak Ben-David, Jason Lee, and Vincent Yao
FinTech lending—known for using big data and advanced technologies—promised to break away from the traditional credit scoring and pricing models. Using a comprehensive dataset of FinTech personal loans, our study shows that loan rates continue to rely heavily on conventional credit scores, including 45% higher rates for nonprime borrowers. Other known default predictors are often neglected. Within each segment (prime/nonprime) loan rates are not very responsive to default risk, resulting in realized loan-level returns decreasing with risk. The pricing distortions result in substantial transfers from nonprime to prime borrowers and from low- to high-risk borrowers within segment. >more

Research Papers > Alternative Investments

Niclas Dombrowski, Wolfgang Drobetz, and Paul P. Momtaz
Crypto funds (CFs) are a growing intermediary in cryptocurrency markets. We evaluate CF performance using metrics based on alphas, value at risk, lower partial moments, and maximum drawdown. The performance of actively managed CFs is heterogenous: While the average fund in our sample does not outperform the overall cryptocurrency market, there seem to be some few funds with superior skills. Given the non-normal nature of fund returns, the choice of the performance measure affects the rank orders of funds. Compared to the Sharpe ratio, the most commonly applied metric in practice, performance measures based on alphas and maximum drawdown lead to diverging fund rankings. Depending on their ranking of preferences, CF investors should thus consider a bundle of metrics for fund selection and performance measurement. >more

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