BANK INVESTMENT ACTIVITY RISK MANAGEMENT IMPROVEMENT: CORPORATE BOND INDEX
Introduction. Securities indices are important indicators of both general economic situation and securities investment attractiveness level in terms of risk and return ratio. Attention is mainly paid to corporate bond indices as bearers of important and useful information, especially within the definition of banks investment strategy. Purpose. The article deals with identifying specific features of debt securities and methodological approaches developing to corporate bond index (CBI) construction according to such specificity in order to improve banks’ investment activity risk management. Methods. In this article general scientific and specific methods of knowledge are applied. There are: method of system approach, dialectical method, scientific abstraction method, analysis and synthesis, logical method, method of economic modeling, qualitative and quantitative analysis method. Results. Because of timeframes and frequency of coupon payments, coupon rate uncertainty and possibility of issue additional conditions, four main criteria to identify CBI calculation base are determined: 1) bonds maturity isn’t less than one year; 2) bonds issue volume isn’t less than 100 million UAH; 3) inclusion of investment level bonds only; 4) inclusion of high liquid bonds only. In order to eliminate capitalization volume impact on CBI dynamics and enable comparison of analytic data over time, CBI calculation involves taking the logarithm of bonds issue volumes. Conclusion. According to analytical data shown in this article, CBI is an indicator of yield of corporate bond market and its detached sectors. Analysis based on the CBI components dynamics allows forecasting average coupon rates and prices of investment class bonds, anticipating future interest rates, assessment the level of investors’ activity and understanding key characteristics of corporate bond issues with the highest demand. Usage of CBI in order to understand and predict securities market trends should become a convenient element of banks’ investment activity risk management. On the other hand, bank can form its bond portfolio by including corporate bonds which were used as CBI calculation base. In terms of risks minimization such investment decision is reasonable because of low credit risk and acceptable liquidity rate of these debt securities.