A New Approach to Optimal Capital Allocation for RORAC Maximization in Banks
| Autor: | Sunil S. Poshakwale, Woo-Young Kang |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2019 |
| Předmět: |
Regulatory risk
Economics and Econometrics Index (economics) media_common.quotation_subject 0211 other engineering and technologies economic capital Sample (statistics) 02 engineering and technology Bayesian inference banks Capital allocation line Banks optimal capital allocation Debt regulatory risk 0502 economics and business Econometrics Economics media_common Optimal capital allocation Capital constraint 050208 finance 021103 operations research Economic capital 05 social sciences Maximization Euler principle Capital (economics) Finance |
| Zdroj: | 53rd Eastern Finance Association Annual Meetings 56th Southern Finance Association Annual Meetings |
| Popis: | We introduce a new model for optimal internal capital allocation, which would allow banks to maximize their Return on Risk-Adjusted Capital (RORAC) under regulatory and capital constraints. We extend the single period model of Buch et al. (2011) to a multi-period model and improve its forecasting accuracy by including the debt effect and Bayesian learning innovations. The empirical application shows that our model significantly improves the RORAC of a sample of banks listed in the S&P 500 index. |
| Databáze: | OpenAIRE |
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