Dematerialising Capital In Financial Firms: An Option Based Approach
AbstractRisk management is at present essential to the banking business mainly as a discipline geared to the protection of depositors with a strong capital support. But risk management yields other benefits, offering a well-grounded procedure to allocate capital and to price banking products. Value at Risk (VAR) is by far the most common methodology for quantifying risk in banks’ portfolios. In this paper we explore an alternative technique. Starting from a proposal by Merton and Perold an options based approach is suggested that - alternative to the VAR methodology – outlines a significant difference between cash and risk capital.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0405013.
Length: 22 pages
Date of creation: 07 May 2004
Date of revision:
Note: Type of Document - pdf; pages: 22
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BANK CAPITAL; OPTION; RISK CAPITAL;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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