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Article
Publication date: 19 October 2010

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Managerial Finance, vol. 36 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 28 September 2010

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Managerial Finance, vol. 36 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 27 September 2011

Shuangzhe Liu and Milind Sathye

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Managerial Finance, vol. 37 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 September 2002

Milind Sathye

Gives an overview of the Australian banking industry, reviews relevant research and analyses productivity changes 1995‐1999 in a panel of 17 banks to assess the effects of…

Abstract

Gives an overview of the Australian banking industry, reviews relevant research and analyses productivity changes 1995‐1999 in a panel of 17 banks to assess the effects of deregulation and the reforms introduced by the Wallis report (1997). Explains the methodology (Malmquist indices calculated by data envelopment analysis) and presents the results, which show a decline of 3.1 per cent in technical efficiency over the period and of 3.5 per cent in the total factor productivity index, although there was an annual productivity growth rate of 1.3 per cent. Discusses the underlying reasons for this, compares productivity changes in individual banks and finds that size makes no difference. Considers the implications for policy makers, describes the industry as having a “limit of deregulation” syndrome and believes that further productivity gains depend on advances in technology.

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Managerial Finance, vol. 28 no. 9
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 10 May 2011

Milind Sathye and Jesmin Islam

The purpose of this paper is to develop a possible method of money laundering and terrorism financing (MLTF) risk assessment in non‐bank entities that are the subject…

Abstract

Purpose

The purpose of this paper is to develop a possible method of money laundering and terrorism financing (MLTF) risk assessment in non‐bank entities that are the subject matter of anti‐money laundering and counter terrorism financing (AMLCTF) Tranche II in Australia.

Design/methodology/approach

The objectives are achieved by proposing a scorecard of risk assessment under its various dimensions drawing from the literature on credit‐scoring models. The method of analogy has been used and appropriate changes made to the elements of typical credit‐scoring model to arrive at a risk assessment model under AMLCTF II. The theory in which the paper is grounded is theories of money laundering regulation. Theory suggests an inverse relationship between money laundering regulation and the amount of money laundering. The more effective the regulatory mechanism the more costly it is for money launderers to launder funds and the lesser the amount of money laundering.

Findings

It was found that the AMLCTF Tranche II will impose several obligations the AMLCTF Tranche II legislation will impose several obligations on the entities such as accounting firms. These obligations require the identification, mitigation and management of MLTF risk arising out of provision of product/service. Two types of risks need to be managed by entities: regulatory risk and business risk. This paper, therefore, proposed a possible method for approaching the issue of risk assessment drawing from the literature on credit‐scoring models.

Research limitations/implications

Future studies can undertake such surveys and gather more empirical evidence regarding the application of the model suggested and its utility in real world scenarios.

Practical implications

The approach developed in this paper has value to the policy makers in the government in addressing risk assessment policy issues in the MLTF area in the context of non‐bank entities such as professional services, e.g. that of accountants. The relevant bodies will also find value in this paper because currently there is no guidance as to how to address the issue. Also, future academics/researchers can take this first approach as a guide and go on do further research in this area and to refine policy issues in this area. No established practice exists in this area at the moment. This paper attempts to provide a guideline.

Originality/value

This paper addresses a major unanswered question in the subject of anti‐money laundering. The question addressed in this paper, which has not been researched before is how MLTF risk can be assessed in the context of non‐bank entities such as professional services, e.g. that of accountants. The model will be useful to user groups such as organizations dealing with bullions, precious stones and precious jewellery, real estate, professional and business services such accounting, auditing and financial services for implementing the AMLCTF Tranche II. The relevant bodies will also find value in this paper because currently there is no guidance as to how to address the issue. Also future academics/researchers can take this first approach as a guide and go on do further research in this area and to refine policy issues in this area.

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Journal of Financial Crime, vol. 18 no. 2
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 1 February 2005

Milind Sathye

The paper uses annual and pooled data on Australian banks for the years 1994 to 1996 to test the two competing hypotheses of market structure and performance; namely, the…

Abstract

The paper uses annual and pooled data on Australian banks for the years 1994 to 1996 to test the two competing hypotheses of market structure and performance; namely, the structure‐conduct‐performance hypothesis (in concentrated markets firms derive higher profits due to collusion) and the efficiency hypothesis (firms derive higher profits because they are efficient). We test these two and other two intervening hypothesis in the context of the Australian banking market. The results reject the efficiency hypothesis and also the two intermediate hypotheses but there is a lack of strong evidence to reject the structure‐conduct‐performance hypothesis. The results are important because such an empirical investigation has not been conducted in Australia to date. The results suggest that it may be hard to defend abolishing the Four‐pillar Policy (which was a major recommendation of Wallis Report 1997) on efficiency grounds.

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Review of Accounting and Finance, vol. 4 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 27 September 2011

Roger Gay

The purpose of this paper is to examine use of the Black‐Scholes (BS) risky asset model to determine choice of optimal investment term in a reinvestment chain model.

Abstract

Purpose

The purpose of this paper is to examine use of the Black‐Scholes (BS) risky asset model to determine choice of optimal investment term in a reinvestment chain model.

Design/methodology/approach

An extension of Tobin's separation theorem is used to establish a mean‐variance efficient strategy for lump sum conversion to an income stream over any fixed term; two criteria involving the BS model are then applied to determine optimal investment term in a perpetual chain of reinvestment. The first criterion selects the term to maximize the value of a call option on excess of a market portfolio accumulation over the indexed value of the original lump sum. The second criterion selects term to maximize the expected present value of this excess without the no‐arbitrage assumption.

Findings

It is found that both criteria lead to useful but different income stream funding strategies. Annual returns data for the All Ordinaries Accumulation Index for years 1900‐2009 are used for an empirical assessment of the relative usefulness of the two criteria. Empirical evidence favours use of the criterion without the no‐arbitrage assumption.

Originality/value

Mean‐variance efficiency of the lump sum conversion strategy has been described elsewhere, but it has not previously been recognized as an extension of the Tobin theorem. Determination of optimal reinvestment term in this context is new and crucial to practical application of the model. One application of universal significance is for retirees emerging from defined contribution pension schemes with lump sums to provide for retirement in the face of longevity risk.

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Article
Publication date: 27 September 2011

Fangcheng Hao and Hailiang Yang

The purpose of this paper is to provide a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime…

Abstract

Purpose

The purpose of this paper is to provide a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime switching Black‐Scholes economy.

Design/methodology/approach

The risk measure is constructed by using the risk‐neutral probability, the physical probability and a family of subjective probability measures. The subjective probabilities can be interpreted as risk managers or regulators' risk preferences and/or subjective beliefs.

Findings

The authors provide closed form expressions for the European option and barrier option.

Research limitations/implications

The results are difficult to apply to a portfolio with many different kinds of options.

Practical implications

The results provide some insights on risk management of portfolios with derivatives.

Originality/value

The paper presents a scenario‐based risk measure for a portfolio of European‐style derivative securities over a fixed time horizon under the regime switching Black‐Scholes economy. Risk management is the most important task for almost all financial industries, although it cannot be claimed that the method and results of this paper solve the problem, it is believed to provide some insights to the problem, albeit theoretical. For vanilla European options and barrier options, the authors obtained a closed form expression for the risk measure. The idea of this paper can be applied to some other exotic options. For portfolios containing different kinds of derivatives, the results of this paper provide some guideline and insights.

Details

Managerial Finance, vol. 37 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 27 September 2011

Apostolos Kourtis and Raphael N. Markellos

The purpose of this paper is to study the importance of business time, and market opening/closing times and days, for American option pricing.

Abstract

Purpose

The purpose of this paper is to study the importance of business time, and market opening/closing times and days, for American option pricing.

Design/methodology/approach

A Bermudan pricing approach is employed whereby the option can be exercised only during the times and days the market is open. The authors apply the approach to the S&P 100 options market.

Findings

It was found that the potential biases that can arise from ignoring the non‐continuous operation of the market are not negligible.

Research limitations/implications

For expositional purposes, the authors assume that the price of the underlying follows a Geometric Brownian motion. This assumption could be relaxed by future research and more complex price dynamics models could be considered.

Practical implications

The findings in this paper could be used in correcting observed option prices, prior to investigating the rationality of early exercise decisions, or in measuring the size of early exercise premia.

Originality/value

This is the first study to examine the effects of business time, and market opening/closing times and days, to American option prices.

Details

Managerial Finance, vol. 37 no. 11
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 23 October 2007

Milind Sathye and Chris Patel

The purpose of this paper is to present a comparative position of the extent of commonality or diversity in the rationale, objectives, processes used and outcomes achieved…

Abstract

Purpose

The purpose of this paper is to present a comparative position of the extent of commonality or diversity in the rationale, objectives, processes used and outcomes achieved by financial intelligence agencies in India and Australia. An effective financial‐intelligence unit (FIU) can make a significant contribution to combating serious financial crimes nationally and internationally.

Design/methodology/approach

The agencies in these two countries are compared using the framework for assessment of financial regulatory agencies – suitably modified to capture the specialist role of such agencies. Information available at the web site of the two agencies has been used.

Findings

The study shows several commonalities and differences in the financial intelligence agencies in the two countries and points to operational and policy changes required in making the units more effective.

Originality/value

It is hoped that the study would encourage similar studies in respect of other FIUs and help in contributing to making the global financial‐intelligence regime more robust.

Details

Journal of Money Laundering Control, vol. 10 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

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