samchain/econo-pairs-v1 huggingface dataset:
These changes can be good or bad for those affected by them. Change therefore leads to risk, the prospect of gain or loss and the risk of loss is something that we must all be aware of. To be aware of risks does not mean eliminating them from our lives, which is certainly impossible, nor does it mean that we should do nothing about risks and accept consequences fatalistically. It means: we must manage risk. To manage risks we must decide what risks to avoid and how we can avoid them; what risks to accept and on what terms to accept them; what new risks to take on and so on. Both theory and practice of risk management have developed enormously in the last two and a half decades. The theory has developed to the point where the risk management is now regarded as a distinct sub-field of the theory of finance and risk management has become a separate subject in the master’s and MBA programs. The subject has attracted a huge amount of intellectual energy not just from finance specialists but also from specialists in physics. The most important factor contributed to this transformation of risk management was, as I mentioned at the beginning, the high level of instability in financial markets. The other factors were rapid developments in information technology, huge increase in trading activity and development of new financial instruments, namely, derivative instruments.

In terms of performance evaluation comparison of actual and benchmark portfolios returns are going to be monitored daily and reported to the top management periodically. For credit risk management side, a transaction limit is assigned to each counterparty, covering all types of credit risks and market risks. The limits are marked to market daily and reflect the amount of exposure that the bank is willing to take with each counterparty. The credit limits are set by employing an internal scoring model that incorporates the counterparty’s external credit ratings, financial information, and some other qualitative information such as the quality of relationship with our bank and the support status, ie the possibility of getting help from the government in case of financial difficulty. The credit rating of the country in which the bank operates is also considered. Reports about limit monitoring are produced regularly. I would like to conclude my remarks by underlining once again how important it is to have an efficient risk management to protect our reserves from financial instabilities all over the world. We need to watch the rapid changes in reserve management in terms of technological developments and in terms of economic conditions very closely and adapt our institutions to these changes right away. 3  BIS Review 38/2000
Moreover, Finansinspektionen is working on introducing an “amortisation culture”, that is, an environment that encourages more households to amortise their loans. The Swedish Bankers Association also recommends that borrowers should amortise their loans. Finansinspektionen has also raised the risk weights on mortgages, which means that the banks have to hold more capital when they issue mortgages. We could perhaps also consider whether it is possible to create financial incentives for households to reduce their indebtedness, for instance, via the tax system. However, such solutions are beyond the mandate of the Riksbank. Regardless of what one decides to do, I believe it is very important to make households aware of the risks a high level of indebtedness may entail for their own finances. As I said earlier, there is a risk that many households are taking it for granted that the economic conditions that have prevailed in recent years will continue to apply. But it is not only households’ increased propensity to take on debt that has caused our current situation. If we look back, we can see that the rise in household indebtedness has gone hand in hand with housing prices. One important explanation for the rising housing prices is that the supply of new housing has been inadequate. Compared with many other countries, construction of new housing in Sweden has been very low.

The need for responsible and prudent action by managers is even more important in the context of the significant transformations financial systems are undergoing. As I have already mentioned, these have raised the profile of a whole set of risks that have been addressed only marginally in the past. In particular, off-balance sheet operations, guarantees and forward operations, for example, require extreme vigilance on the part of financial institutions. This is because, among other reasons, identifying and assessing the risks they entail is sometimes not straightforward. Moreover, international corporate scandals have shown the great importance of reputational risk. In all such scandals the firms involved had excessively complex and insufficiently transparent organisation structures. employing in their operations special purpose vehicles located in opaque jurisdictions. In many of these cases the most basic mechanisms underpinning good corporate governance also failed. The complexity of structure and the lack of firmly established corporate governance mechanisms in organisations is also conducive to operational risk, which has significant potential to cause institutions damage that is hard to repair. The latter have increased their efforts to develop methods to improve the measurement of this risk, but there is still a long way to go before this is achieved. Such complex and opaque organisational structures also make it difficult for the institutions to know their customers properly. That brings me to the second element institutions need to focus on: getting to know, as far as they are able, their customers’ activities.
Inflation targeting has served us well. Monetary policy is the first line of defence in demand management. When the impact of the crisis was felt in the Norwegian economy in autumn 2008, the key policy rate was sharply reduced. This contributed to counteracting the negative effects on output and employment in Norway. A credible and firmly anchored monetary policy can curb the impact of external shocks. This increases the resilience of the Norwegian economy. Owing to substantial cross-border labour flows, changes in the competitive environment and new trade patterns, consumer price inflation has in periods deviated from the target. In such a situation, monetary policy must be oriented towards bringing inflation towards the target over time, while preventing excessive swings in output and employment. The appropriate amount of time that should be taken to reach the inflation target will depend on the shocks to which the economy is exposed and their duration. Chart 8: Rise in consumer prices and producer prices In today’s situation, it is appropriate to use a few years to bring up inflation. Prices for Norwegian goods have increased considerably more than consumer prices, reflecting the improvement in Norway’s terms of trade. Incomes, output and employment are rising at a solid pace. Household debt and house prices are still moving up. These are the key reasons why the key policy rate has not been lowered further. We will not lose sight of the inflation target.

Nonetheless, we have seen a clear shift in financial market sentiment. This shift is reflected in the fall in European government bond yields. The clearest indication of optimism can be found in equity markets. Chart 6: Government Pension Fund Global With the upswing in equity markets, the value of Norway’s financial wealth is increasing. Close to 60 percent of the capital in the Government Pension Fund Global – Norway’s sovereign wealth fund – is invested in global equity markets. When times are good in the global economy and optimism is on the rise, the return on the Fund increases. Conversely, turbulence and low risk willingness in the market have a negative effect on the Fund’s assets. This is a risk we have to live with to achieve solid returns over time. Because of the Fund’s long-term horizon, short-term risk tolerance is high. We can exploit this by sitting tight and engaging in countercyclical investment. The Fund’s size also allows us to reduce risk by spreading our investments across many countries. Norway has become a global financial investor. Through the Fund’s investments, Norway increasingly takes part in value added generated in other countries. Over the past hundred years, growing global trade and cross-border flows of capital and labour have been important factors driving economic progress. At times, the principles of free trade and capital movements have been set out of play. Walls have been erected between countries in the form of trade barriers and restrictions on capital flows. This has not been successful.
Donald Joshua Jaganathan: Nailing down the winning strategies in bancassurance Keynote address by Mr Donald Joshua Jaganathan, Assistant Governor of the Central Bank of Malaysia, at the 15th Asia Conference on Bancassurance & Alternative Distribution Channels: “Nailing Down the Winning Strategies in Bancassurance”, Kuala Lumpur, 6 May 2014. *  *  *  It gives me great pleasure to be here at the 15th Asia Conference on Bancassurance & Alternative Distribution Channels. This conference takes place at an exciting time for the insurance industry in Asia. After decades of strong growth and modernisation, Asia has achieved remarkable standards of living, with hundreds of millions lifted out of poverty and a middle-class population of over half a billion. Structural reforms following the Asian financial crisis have enabled the region to remain resilient throughout the global financial crisis of 2008/2009. Post-crisis, the vibrant economies in Asia have continued to be a pillar for global recovery, with this year’s GDP for developing Asia projected by the IMF to grow 6.7% 1. Insurance markets have also grown in tandem with the economy. Over the past decade, total premium in emerging Asia 2 increased by 10% per annum for life business and 13% per annum for non-life business on average 3 and is projected to grow 11% this year and 10% 4 in the next. The insurance industry, however, cannot be complacent and take this story for granted.

It would appear, therefore, that as the economy responds to a gradual improvement in external demand, it may still be constrained by its own rigidities. Removing these obstacles and correcting the resultant imbalances is, therefore, a precondition for achieving more rapid growth, which in turn is the key to accelerating convergence with euro area income levels. 2  BIS Review 154/2009  Faster growth is achievable but depends on … The Roman writer Ovid said that times change and we change with them. That may be so, but what really matters in today’s circumstances is how rapidly we read the signs of the times and adapt to them. I will focus on three directions of necessary change. The first is towards greater competitiveness. The second, and related thrust, would be to promote higher productivity. The third focuses on fiscal consolidation and the pursuit of sound public finances. Before proceeding, however, I should stress that none of these objectives is attainable without further structural reforms, debunking the popular notion that the State has an unlimited capacity to satisfy demands for free goods and services and an end to inefficient practices that involve subsidies. … greater cost competitiveness … First of all, in Malta’s case sustained economic growth depends largely on our ability to attract export-oriented foreign direct investment. Given the past increases in unit labour costs, the only way of maintaining a competitive edge is by ensuring that these costs rise by less than those of our competitors.
The thickness of the red arrows is proportional to the size of the net transactions (in terms of notional amount) between the clearing member and their counterparty. 2  This is because clearing requires an adequate degree of standardisation of a product’s contractual terms and operational processes, sufficient market liquidity to support default management in potentially stressed conditions, and reliable pricing sources to support accurate margining 3 See FBS Chair letter to the G20 (July 2017) http://www.fsb.org/wp-content/uploads/P030717-1.pdf 4 For further information see the Bank of England FMI annual report 2017. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  The concomitant of these benefits has been greater concentration of risk reducing activity in CCPs. There is notable concentration amongst the largest CCPs and largest clearing members and there are clear interdependencies between CCPs and their clearing members. 5  It would be wrong to see this as some manifestation of “unintended consequence”; it is rather the other side of the simplification coin; an intrinsic part of the overall risk reduction. Concentration brings its own risks but may still be preferable overall to the complexity that existed before the crisis: returning to a derivatives universe that linked the international financial system together through a far more complex network of bilateral exposures, would in my view be a retrograde step. But it would be equally wrong to ignore the risks that could arise from higher concentration.

John C Williams: Building an equitable future Remarks (via videoconference) by Mr John C Williams, President and Chief Executive Officer of the Federal Reserve Bank of New York, at the Economic Inequality Policy Forum: The Impacts of COVID-19 on Communities of Color and Policy Insights for an Equitable Economic Recovery, 24 September 2020. * * * Hello everyone, and welcome to the New York Fed’s third Economic Inequality Policy Forum. It’s a pleasure to speak with all of you who are joining us for this conversation. For me, today’s event is about sharing research and hearing your recommendations, so I’m going to keep my opening remarks brief. Before I continue, let me give the disclaimer that the views I express are mine alone and do not necessarily reflect those of the Federal Open Market Committee or anyone else in the Federal Reserve System. Since the outbreak of the pandemic, we’ve seen severe economic pain, unprecedented levels of unemployment, and enormous uncertainty about the future. The health and economic effects of COVID-19 have created tremendous hardship for many Americans across the country, but they have been especially painful for communities of color. We know that people of color and Black people in particular have experienced higher rates of illness and death.
What is really important is that national budgets should not lead to structural imbalances that may jeopardise the sustainability of public finances and the proper functioning of Monetary Union. This is the best formula for contributing, at the current juncture, to reinforcing agents’ confidence and boosting the favourable effects of European economic integration. Against the background of the exceptional institutional characteristics of European monetary integration, it cannot be ignored that fiscal indiscipline in specific countries has negative externalities for the area as a whole; consequently, it is vital to maintain rules - such as those ìn the EU Treaty and the Stability and Growth Pact - limiting the fiscal autonomy of the Member States. This requirement is even more pressing now that ten new countries have joined the EU and expressed their wish to adopt the euro once they meet the attendant conditions. Given the current difficulties with the EU’s fiscal discipline arrangements, the priority would appear to be to ensure the proper functioning of the multilateral surveillance and control procedures of the current rules. Such rules should be accepted by all the Member States as the sole means of maintaining the effectiveness and credibility of the regulatory framework. In any event, the upturn in activity that the European economy appears to have embarked upon should prove conducive to pushing through national governments’ reform plans and to strengthening the fiscal commitments currently in place.

Jaime Caruana: Presentation of the Annual Report Address by Mr Jaime Caruana, Governor of the Bank of Spain, at the presentation of the Annual Report to the Governing Council of the Banco de España, Madrid, 18 June 2004. *  *  *  Ladies and gentlemen, The recovery in the international economy - which was described as modest, hesitant and uneven in the speech presenting last year’s Annual Report - progressively gathered momentum during 2003 and early 2004, as well as extending to other regions. Adding to the initial buoyancy of the US economy was the considerable dynamism of a large number of east Asian countries, including most notably China. The Japanese economy, flagging in a marked depression during the previous decade, picked up clearly, and the central and eastern European countries sustained relatively high growth rates. Only the euro area, among the industrialised economies, and Latin America, among the emerging group, showed a more hesitant recovery in activity. The favourable developments in the international economy were compatible with continuing low inflation, despite the notable rise in oil and other commodity prices. The risk of deflation which, at times, it was feared might affect some of the main economies, including the United States, faded as the recovery firmed. The sound behaviour, on the whole, of the financial markets and the trend of confidence indicators seem largely to indicate that expectations about the future course of the world economy are now brighter again.
Øystein Olsen: Financial economics and the challenges in managing Norway’s Government Pension Fund Introductory remarks by Mr Øystein Olsen, Governor of Norges Bank (Central Bank of Norway), at the NBIM (Norges Bank Investment Management) Financial Research Conference, Oslo, 30 August 2011. *  *  *  It is a great pleasure for me to welcome each of you to the first NBIM Financial Research Conference. The objective of today’s conference is to present and discuss a set of papers at the forefront of academic research on financial economics. This event is also part of Norges Bank’s efforts to strengthen ties with the academic community. In addition to some of the best researchers in financial economics, we have in this room some of the top investment professionals in Norway. The opportunities for interesting discussions should be good. At the outset, the intention of this conference was to present leading academic research, without placing weight on its direct relevance to NBIM. However, as this conference will show, there is considerable common ground between the research frontier of financial economics and our challenges in managing the Government Pension Fund. Over the last three decades, researchers have moved a long way from the Capital Asset Pricing Model. One important result of empirical financial research is that expected returns on traded assets vary much more over time and across assets, than was previously thought and implicitly assumed by the CAPM.

All the prominent scholars who are presenting papers today will analyse some of the aspects of how and why market risk premiums vary. Financial regulations and financial frictions are  BIS central bankers’ speeches  1  important to our understanding of why risk premiums change over time. A thorough understanding of financial regulations and financial frictions might also be important in identifying unique investor characteristics. Axel Weber will shed light on the implications of financial sector regulation on the functioning of markets and the pricing of assets. Lasse Pedersen has provided valuable research on the micro structure of funding markets and how liquidity risks create systemic problems. In particular, he will cover frictions in financial markets. It is quite clear that the Government Pension Fund differs from the average investor in important respects. In addition, we need to understand how variation in risk premiums can be consistent with highly competitive financial markets. Why don’t all investors buy “value” or rebalance? Ken Froot will talk about rare events and disaster risks, how these events are priced in markets. He will also give insights on individual investor characteristics which give comparative advantages in holding these priced risk premiums. Ken French will speak about two ways for an investor to generate excess returns: informational advantages and systematically harvesting risk premiums which the investor has a comparative advantage in holding. Both Froot and French will mainly talk about average portfolio weights in highly competitive markets.
In the following, I will discuss the temptations facing issuers of notes and coins, the binding mechanisms that have been tested, and the potential gains for society associated with a central bank that keeps its word. 2. A king’s word is worth a throne – but sometimes not a krone  It has always been tempting for issuers of money to exploit this privilege. It costs less to produce a coin or a banknote than the value printed on it. The added value accruing to the issuer is called seignorage. Over-issuance of notes and coins leads to inflation and a fall in the value of money, and holders of money pay a so-called inflation tax. A sharp fall or strong rise in the value of money also impairs the functioning of the economy because it becomes more difficult to keep track of changes in the price of one good relative to another. It is important that changes in relative prices are easy for both consumers and producers to observe. Otherwise, the function of prices as conveyors of information for consumption, production and investment decisions will be impaired. The economy will operate less efficiently, resulting in lower growth and welfare. In the earliest monetary systems, the value of money corresponded to the metal value of the coin. Measured in metal, the value of money was inevitably stable. This system was not as dependent on confidence, since the metal content of the coin could in principle be verified in every transaction.

One characteristic of the Chilean economy is that changes in costs are regularly passed on to consumer prices. Markets for foodstuff are globally integrated and competitive. In the case of fuels, every week the changes in the international price are passed on to domestic consumers. However, there is a price stabilization fund to smooth out short run fluctuations  BIS Review 39/2008  3  and recently there has been a gasoline tax cut, which ameliorates the large increase in international prices. Finally, the electric power price-setting mechanism is designed to pass changes in upstream marginal costs to retail prices. Electric power rates, affected by a rise in costs, posted an average increase of 23% during 2007 compared with a less than 6% average increase between 2000 and 2006. This context of price flexibility provides the right signals to markets. In the case of Chile, with the increase in the prices of electricity and minerals, several investment projects are in the pipeline, which will propel an expansion of supply. Electricity $ MM; index Dec-98=100) 1200  240  1000  200  800  160  600  120  400  80  200  40  0  0 96  98  00  02  04  06  III  07  Energy investment (2)  III  08 (1)  CPI Electricity  (1) Figures as of February. (2) Includes investment in buildings, engineering, equipments and others.