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Value at Risk and Bank Equity / Value at Risk und Eigenkapitalausstattung von Banken

Author

Listed:
  • Broll Udo

    (Lehrstuhl für Internationale Wirtschaftsbeziehungen, Universität des Saarlandes, D-66041 Saarbrücken)

  • Wahl Jack E.

    (Lehrstuhl für Investition und Finanzierung, Universität Dortmund, D-44221 Dortmund)

Abstract

The value at risk measure has become a widespread risk management concept in many different types of financial organizations. The value at risk concept is the attempt to summarize in a single number the return risk in a portfolio of financial assets. This paper studies the impact of the value at risk approach on required equity capital of a banking firm. Value at risk is a measure of risk based on a probability of loss and time in which this loss can be expected to occur. We demonstrate that managerial and market factors determine optimal asset liability and equity policy of the bank. It is shown that the probability of bankruptcy has a complex impact upon the decision making of bank management.

Suggested Citation

  • Broll Udo & Wahl Jack E., 2003. "Value at Risk and Bank Equity / Value at Risk und Eigenkapitalausstattung von Banken," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 223(2), pages 129-135, April.
    • Handle: RePEc:jns:jbstat:v:223:y:2003:i:2:p:129-135
    DOI: 10.1515/jbnst-2003-0202
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    References listed on IDEAS

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    1. Katerina Simons, 2000. "Use of value at risk by institutional investors," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 21-30.
    2. Xavier Freixas & Jean-Charles Rochet, 1997. "Microeconomics of Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061937, December.
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