Economic Capital: How It Works, and What Every Manager Needs by Pieter Klaassen

By Pieter Klaassen

Managers can install and deal with fiscal capital extra successfully once they know the way their judgements upload price to their corporations. financial Capital: the way it Works and What each supervisor must comprehend offers new how one can outline, degree, and enforce administration techniques by utilizing fresh examples, many from the sub-prime concern. The authors additionally talk about the position of monetary capital in the broader context of administration duties and actions in addition to its relation to different danger administration instruments which are to be had to the trendy possibility supervisor. Explains how you can use fiscal capital in balancing possibility and go back Evaluates suggestions to difficulties encountered in constructing an fiscal capital framework Emphasizes instinct attracts detailed cognizance to embedding threat modelling methods inside of financial capital frameworks

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Extra info for Economic Capital: How It Works, and What Every Manager Needs to Know

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Morgan Chase, one of the biggest banks in the United States and the world, discloses its economic risk capital for credit, market, operational, and private equity risk, which is compared to its total common shareholders equity. Credit Suisse, active in investment banking, private banking, and asset management, uses economic capital for risk management, capital management, and planning and performance. It provides extensive disclosure of economic capital and RAROC numbers. Probably one of the most extensive disclosures of economic capital and RAROC numbers, including some explanation of the methodologies, is by the Dutch bank insurer ING.

This covers assets and liabilities in trading books, but also could include the market risk of assets and liabilities classified as available for sale, or even hold-to-maturity assets and liabilities. Banks often limit the scope of market risk to the assets and liabilities in their trading books, which is in line with the definition of market risk in the regulatory solvency regime for banks. We will limit market risk to trading assets and liabilites in this book, and include the market risk for other assets and liabilities in asset-liability management risk.

A framework for incorporating diversification in the solvency assessment of insurers. June 10, 2005. 10 Commission of the European Communities. Amended proposal for a directive of the European Parliament and of the Council on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II). 26 February 2008. 11 Congressional Research Service Report for Congress. Bear Stearns: Crisis and “rescue” for a major provider of mortgage-related products. Updated March 26, 2008. 12 Christopher Cox, letter to Nout Wellink Chairman Basel Committee on banking supervision, Re: Sound practices for managing liquidity in banking organizations.

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