Papers by William Osterberg
Working paper, Dec 1, 1997
for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Worki... more for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the.Federa1 Reserve System. Federal Reserve Bank of Cleveland working papers are distributed for the purpose of promoting discussion of research in progress. These papers may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications.
Working paper, Oct 1, 1990
This paper examines two proposals to correct the risk-taking incentives embedded in the current d... more This paper examines two proposals to correct the risk-taking incentives embedded in the current deposit insurance system and to provide protection to the deposit insurance fund. The first would require banks to issue subordinated debt, and the second would require bank stockholders to post surety bonds. We use the cash-flow version of the Capital Asset Pricing Model to show how each proposal would affect the values and rates of return on uninsured deposits and equity. We then indicate the impact that each proposal would have on the values of the Federal Deposit Insurance Corporation claim and on the bank, emphasizing the role of deposit insurance pricing.
Research in finance, May 19, 2004
for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Worki... more for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the.Federa1 Reserve System. Federal Reserve Bank of Cleveland working papers are distributed for the purpose of promoting discussion of research in progress. These papers may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications.
Banks are required to hold capital primarily as a buffer against future losses and in order to re... more Banks are required to hold capital primarily as a buffer against future losses and in order to reduce the exposure of the deposit insurer. However, as regulators and researchers have recognized, changes in capital requirements also affect bank portfolio behavior. It is possible that increased capital requirements may lead banks to increase their riskiness and thus increase their expected losses or increase the potential expo- sure of the deposit insurer. The object of this article is to show that the impact of increased capital requirements depends on the extent to which deposit costs reflect bank portfolio risk.' In particular, we show that with risk-based deposit insurance, the incentives to increase leverage or portfolio risk in response to an increase in bank capital requirements are reduced. The article is organized as follows. First, we define bank capital and discuss the mechanisms
for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Worki... more for helpfhl comments and suggestions. Sandy Sterk provided outstanding research assistance. Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the.Federa1 Reserve System. Federal Reserve Bank of Cleveland working papers are distributed for the purpose of promoting discussion of research in progress. These papers may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications.
Working paper (Federal Reserve Bank of Cleveland), 1999
Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to s... more Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System Working papers are now available electronically through the Cleveland Fed's home page on the World Wide Web: http://www.clev.frb.org.
Journal of International Money and Finance, 1997
Journal of International Financial Markets, Institutions and Money, 2000
Journal of International Financial Markets, Institutions and Money, 2000
This paper considers the relationship between daily deviations from uncovered interest rate parit... more This paper considers the relationship between daily deviations from uncovered interest rate parity and US and German central bank intervention. The study uses daily overnight Eurocurrency deposit rates with a maturity time of 1 day, which exactly matches the sampling interval of the data. The intervention data are the official net daily purchases and sales of dollars vis-Ã -vis the German mark by the Federal Reserve System and the Bundesbank. The model uses FIGARCH innovations to represent the degree of long-term dependence in the volatility process. Some support is found for the intervention variables affecting the risk premium as predicted by theory. The impact of intervention in the 2 years immediately following the meltdown of the equity markets in October 1987 and Louvre Accord is particularly strong.
Journal of International Economics, 1997
... balance approach or alternatively as a signal to market participants of the central bank'... more ... balance approach or alternatively as a signal to market participants of the central bank's future monetary policy ... With risk averse investors who view domestic and foreign bonds as imperfect substitutes, the impact of intervention will adjust the relative rate of return by changing ...
Working paper (Federal Reserve Bank of Cleveland), 1999
A study of the impact of capital requirements on bank portfolio decisions, showing that the varia... more A study of the impact of capital requirements on bank portfolio decisions, showing that the variance of earnings and the incentive to increase leverage are reduced with risk- and leverage-related deposit rates, and that the impact of increased capital requirements on portfolio behavior is generally ambiguous.
This paper presents an empirical analysis of commercial bank holdings of municipal securities (mu... more This paper presents an empirical analysis of commercial bank holdings of municipal securities (munis) from June 1985 through December 1988, using the FFIEC's Reports of Condition and income. While motivated by previous analyses suggesting that a shift from munis to taxable securities is a primary determinant of the overall impact of the Tax Reform Act of 1986 on bank profitability, this paper does not directly analyze the impact of that legislation. However, the paper modifies the specification of muni demand employed in previous analyses to consider roles for state pledging requirements, realization of capital gains or losses, and the simultaneous provision for loan losses. the results provide some support for including state pledging requirements, realization of capital gains and losses, and the loan loss provisions in analyses of muni holdings.
Economic Commentary (Federal Reserve Bank of Cleveland)
The increased turmoil in international financial markets, starting with the Asian crises of 1997,... more The increased turmoil in international financial markets, starting with the Asian crises of 1997, has led to calls for financial assistance from the wealthier nations. In December 1997, the United States announced a $5 billion commitment toward an international package of financial assistance for South Korea. Two months earlier the United States pledged $3 billion for assistance to Indonesia. In both instances, the Exchange Stabilization Fund (ESF) was to be involved.
A discussion of leveraged buyouts and their dramatic impact on traditional corporate structure an... more A discussion of leveraged buyouts and their dramatic impact on traditional corporate structure and relationships among stockholders, bondholders, and employees.
Working paper (Federal Reserve Bank of Cleveland)
Working paper (Federal Reserve Bank of Cleveland)
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Papers by William Osterberg