Risk Management and Shareholders' Value in Banking: From by Andrea Sironi

By Andrea Sironi

This ebook offers an built-in framework for chance dimension, capital administration and price construction in banks. relocating from the size of the hazards dealing with a financial institution, it defines standards and principles to help a company coverage aimed toward maximizing shareholders' worth.

Show description

Read or Download Risk Management and Shareholders' Value in Banking: From Risk Measurement Models to Capital Allocation Policies PDF

Best risk management books

Controls, Procedures and Risk (Securities Institute Operations Management)

'Controls, techniques and hazard' covers the abilities and techniques had to let the tracking and handling of danger and the authors concentrate on strategies layout, implementation and documentation. significant emphasis can be given to the major controls and the significance of keep watch over services, audit and danger administration teams and coverage.

Understanding Market, Credit, and Operational Risk: The Value at Risk Approach

A step by step, actual international advisor to using price in danger (VaR) versions, this article applies the VaR method of the size of industry probability, credits danger and operational danger. The publication describes and reviews proprietary types, illustrating them with functional examples drawn from real case reviews.

Risk Management for Insurers, Second Edition

All around the globe insurers are dealing with the impression of the turmoil at the monetary markets, making it extra an important than ever to completely know how to enforce possibility administration top perform. during this well timed moment variation, professional René Doff argues that Solvency II, which goals to enhance criteria of possibility evaluation, might be considered as a chance.

Finance and the Behavioral Prospect: Risk, Exuberance, and Abnormal Markets

This booklet explains how investor habit, from psychological accounting to the flamable interaction of desire and worry, impacts monetary economics. The transformation of portfolio idea starts off with the identity of anomalies. Gaps in belief and behavioral departures from rationality spur momentum, irrational exuberance, and speculative bubbles.

Additional resources for Risk Management and Shareholders' Value in Banking: From Risk Measurement Models to Capital Allocation Policies

Example text

A bank should therefore equate all daily marginal gaps to zero (that is, the maturity of all assets and liabilities should be perfectly matched, with every asset facing a liability of equal value and duration). Given a bank’s role in transforming maturities, such a requirement would be completely unrealistic. Moreover, although many banks have information on marginal gaps relating to very short sub-periods, still they prefer to manage and hedge only a small set of gaps relative to certain standard periods (say: 0–1 month, 1–3 months, 3–6 months, 6–12 months, 1–3 years, 3–5 years, 5–10 years, 10–30 years, over 30 years).

Possible changes in flows of interest income and expenses, and in the market value of assets and liabilities brought about by an imbalance between their maturities). An indirect effect can also occur, which is linked to the impact that rate changes can have on volumes negotiated by a bank. 1 Usually such a change also causes a decline in demand liabilities and call loans. In effect, when market rates go up, account holders usually find it more convenient to transfer their funds to more profitable types of investment.

Assume that during the year market interest rates (both on assets and liabilities) rise by one percentage point. When the certificate of deposit matures, the bank will be obliged to refinance the mortgage by issuing a new CD at a higher rate (3 %), though it’s still getting a 6 % return on its investment. So, the NII would shrink from 4,000 to 3,000 euros (that is, from 4 % to 3 % of the investment). When the maturity on an asset is longer than that of a liability, the bank is exposed to refinancing risk (namely, the risk that the cost associated with financing an interest-earning position rises, resulting in a lower interest margin).

Download PDF sample

Rated 4.58 of 5 – based on 3 votes