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
Englisch
ISBN
978-952-462-539-5

Erschienen in
Series: Bank of Finland Research Discussion Papers ; No. 25/2009

Klassifikation
Wirtschaft

Ereignis
Geistige Schöpfung
(wer)
Milne, Alistair
Onorato, Mario
Ereignis
Veröffentlichung
(wer)
Bank of Finland
(wo)
Helsinki
(wann)
2009

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Milne, Alistair
  • Onorato, Mario
  • Bank of Finland

Entstanden

  • 2009

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