Arbeitspapier
Risk-adjusted measures of value creation in financial institutions
Measuring value creation by comparing the RAROC of an exposure (the return on risk capital) with a single institution-wide hurdle rate is inconsistent with the standard theory of financial valuation. We use asset pricing theory to determine the appropriate hurdle rate for such a RAROC performance measure. We find that this hurdle rate varies with the skewness of asset returns. Thus the RAROC hurdle rate should differ substantially between equity which has a right skew and debt which has a pronounced left skew and also between different qualities of debt exposure. We discuss implications for financial institution risk management and supervision.
- Sprache
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Englisch
- ISBN
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978-952-462-539-5
- Erschienen in
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Series: Bank of Finland Research Discussion Papers ; No. 25/2009
- Klassifikation
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Wirtschaft
- Ereignis
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Geistige Schöpfung
- (wer)
-
Milne, Alistair
Onorato, Mario
- Ereignis
-
Veröffentlichung
- (wer)
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Bank of Finland
- (wo)
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Helsinki
- (wann)
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2009
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Milne, Alistair
- Onorato, Mario
- Bank of Finland
Entstanden
- 2009