ENTROPY ANALYSIS AS A METHOD OF DETERMINING THE RISK LEVEL OF BANKING ACTIVITY
Journal Title: Проблеми системного підходу в економіці - Year 2018, Vol 3, Issue 65
Abstract
The article is devoted to the use of entropy analysis as a relatively new method for assessing the level of risk, which is based on the quantitative calculation of uncertainty. The use of new approaches to risk analysis and risk assessment is a prerequisite for overcoming the crisis and shaping the foundations for sustainable development. Changes in uncertainty indicate fluctuations in risks that can be estimated based on the methodological principles of entropy analysis. The article proposes to assess the level of entropy based on the dynamics of growth rates of interest income, commission income and other operating income for “Raiffeisen Bank Aval” JSC, PJSC “CREDIT AGRICOLE BANK” and PJSC “UKRSOCBANK”. Analysis of the indicators of interest income, commission income and other operating income allows us to conclude on the different structure of incomes of selected banks, indicating different directions of activity. The choice of indicators for research using the correlation analysis is substantiated. The Shannon formula is used to calculate the entropy index. In order to reduce the differences in the spread of the values of the growth rate of net income, the method “minimum-maximum” was used. Management of banks can assess the effectiveness of making management decisions and monitor the occurrence of unstable situations with the help of entropy analysis. Calculated indicators of entropy, which characterize the objects of the study, are not evidence of stabilization of the economic situation in banks, but indicate the lack of information on the emergence of new threats and risks.
Authors and Affiliations
Yu. V. Kaliuzhna, V. V. Konyev
Keywords
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