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A real options approach for evaluating the implementation of a risk-sensitive capital rule in banks

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Author Info
Nordal, Kjell Bjørn
Abstract

I evaluate a bank's incentives to implement a risk-sensitive regulatory capital rule. The decision making is analyzed within a real options framework where optimal policies are derived in terms of threshold levels of credit risk. I provide a numerical example for the implementation of internal ratings based models for credit risk (the IRB approach) under the new Basel Accord (Basel II).

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File URL: http://www.sciencedirect.com/science/article/B6W61-4W1JW52-1/2/d120c2b1c4b0bbee17cb23f377f2df21
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Publisher Info
Article provided by Elsevier in its journal Review of Financial Economics.

Volume (Year): 18 (2009)
Issue (Month): 3 (August)
Pages: 132-141
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Handle: RePEc:eee:revfin:v:18:y:2009:i:3:p:132-141

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Web page: http://www.elsevier.com/locate/inca/620170

For technical questions regarding this item, or to correct its listing, contact: (Heidi Boesdal).

Related research
Keywords: Real options Capital structure Capital regulation Investment timing Basel II;

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This page was last updated on 2009-12-3.

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