Risk Management and Value Creation in ... - Arabictrader.com

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Index 313 Benchmarking, 14, 209 Bernoulli, 60, 172, 177 Best practice, 130, 210, 238 Beta: CAPM, 245, 266 external, 37, 246, 253–254, 266, 268 instantaneous equity, 255 internal, 185, 213, 242, 246, 253, 266, 268–269, 275, 283–284 market, 36, 168, 230, 253, 269 of transaction, 255 Bid-ask spread, 124 BIS. See Bank for International Settlements Black-Scholes, 131, 221–223, 227, 248, 255 Bond holder(s): credit sensitive, 23, 142 junior, 142, 151, 156, 158–161, 219 senior, 142, 147, 151–152, 156– 159 external, 142 Bond, zero-coupon, 222, 247 Bonus, 85, 89 Book capital. See Capital, book Book value, 110–111, 120, 149, 160– 161, 222–227, 230–231, 260, 264 Break even, 255 Brownian motion, geometric, 221 Business disruption, 162, 197, 216 Business risk. See Risk, business capital. See Capital, economic, (for) business Business unit, 1, 15, 26–27, 164, 177, 187, 193, 195, 205–209, 213, 244, 283, 285 CAD. See Capital Adequacy Directive, European Call option. See Option(s), call Capacity, 94, 126, 130, 153 Capital adequacy, 159–161 Capital allocation, 7, 191, 205, 283 Capital: as buffer function of, 134, 141, 145, 150, 159, 169, 211, 253, 262, 268 as cushion. See Capital, buffer function of as substitute for risk management, 112, 123, 126, 140, 236 available, 139, 145, 162 Capital base, 157, 195, 208 Capital benefit, 243–244, 251–252, 283 Capital, book, 4, 139, 146–147, 161, 194, 219 Capital concepts, 146 Capital, economic, 5–7, 137, 156, 158, 160, 164, 169 aggregation across risk types, 210– 213 as adequate risk measure, in banks, 164, 166, 236–237 as proxy or shortcut for risk capital, 160, 163, 237 as theoretical construct, 159, 164 as total risk measure, 170, 185, 214, 219, 253, 265–266, 272, 285 for business risk, 205–210 for credit risk, 170–186 for event risk, 199–205 for market risk, 186–196 for operational risk, 196–210 VaR-based, 219, 236 Capital: excess, 150, 162 human, 84, 86, 89 invested, 263–264, 273 real, 6, 192, 252, 269, 280 Capital, regulatory, 4, 142, 144–147, 151, 154, 160, 162–163, 194, 209, 239–240 Capital, requirement, 5, 139, 145– 146, 150, 153, 158, 162, 165– 166, 192, 211–212, 242, 284 economic, 139, 143–145, 161–163, 175, 193, 212–216, 235–236, 253, 267 marginal or incremental, 212, 236 regulatory, 142–145, 164, 194, 209, 239 standalone, 260 Capital, risk, 5, 26, 137, 146, 151, 153–154, 262, 270, 289
314 INDEX Capital: Tier-1, 139, 146–148, 161, 219 Tier-2, 139, 146–148, 156, 161, 226 Capital, unallocated, 212, 283 Capital Adequacy Directive, European (CAD), 3, 147 Capital Asset Pricing Model (CAPM), 2, 15, 25, 34, 59, 62, 67, 71, 129, 134, 219, 230, 238, 240, 245–246, 249, 253–255, 261, 265–266, 268, 290 Capital budgeting, 72, 133–136, 239, 242, 267–268, 275 new approaches, 268, 273–274 decision rule, new, 272 decision(s), 2–5, 27, 62–63, 72, 123 principle(s) or procedure(s), 133–134 tool(s), 134–135, 239, 242, 245, 267–269, 282, 284–285, 290– 291 Capital Market Line (CML), 43 Capital market. See Market Capital measurement, 146 Capital multiplier, 182, 185, 204 Capital structure, 4, 12, 27, 72, 95, 115, 133, 135–138, 261, 264, 284, 289 actual, 265, 268, 274, 279–280, 284 choice, 133, 140–141, 280 decision(s), 4, 133–134, 247–248, 262, 269, 274, 279 optimal, 66, 126, 130, 265 Capitalization. See Capital base Cash capital, 154, 160–162, 262–264, 267–271 Cash flows: operating, 61, 94, 97, 107, 109 risk profile of, 1, 12, 14, 59, 62 stabilization of, 101 time structure of, 1, 12, 14, 59, 62 volatility of, 32, 107. See also Volatility of (free) cash flows Catastrophe, natural, 196 Chain reaction, 144 Chapter 11, 107 Charge-off(s), 57, 245 Circular problem, 256 Claim(s): fixed, 81, 93, 95, 107 junior, 147 residual, 81, 149 senior, 146 Claim holder(s). See Stakeholder(s) residual, 142, 152, 155–156 Clientele, 24, 70–71 CML. See Capital Market Line Cohort, 174 Collateral, 32, 76, 100, 109, 142, 172, 174–175 Company(ies): as risk-neutral agents, 61, 100, 219, 280, ensuring long-term survival of, 13, 33, 55, 132 industrial See also Corporation(s), industrial Compensation, 83, 85, 89, 242, 247, 268, 279 incentive, 86, 242 managerial, 85 pecuniary, 210 performance-based, 85, 90 Competition, 1, 132, 206, 276 Competitive advantage(s). See Advantages, comparative Concentration. See also Lumpiness in credit portfolios, 140–141, 145, 182 index, 91 ratio, 91 Concerns, with bottom-up approach, 212 Conditions: economic, 32, 77, 172, 208, 221 for coherent risk measures, 213 Confidence interval. See Confidence level Confidence level, 5, 74, 154, 159– 160, 166, 168–170, 175, 182– 185, 187–192, 194–195, 202, 204, 206, 211, 215–217, 248, 251, 253, 263, 269, 284
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isk management and value creation i
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Copyright © 2002 by John Wiley & S
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preface From an empirical as well a
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acknowledgments No book is solely t
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x CONTENTS Goals of Risk Management
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xii CONTENTS Definition of RAROC 24
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xiv FIGURES Figure 5.5 Figure 5.6 F
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symbols ↑ ↓ α β i xvi Increas
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xviii SYMBOLS ln Natural logarithm
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abbreviations APT BIS bn bps CAPM C
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2 RISK MANAGEMENT AND VALUE CREATIO
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CHAPTER 2 Foundations for Determini
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Foundations for Determining the Lin
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Page 285 and 286: 262 RISK MANAGEMENT AND VALUE CREAT
Page 316 and 317: eferences Aguais, Scott D., and Ant
Page 318 and 319: References 295 Blanden, Michael (19
Page 320 and 321: References 297 and Abuses,” Journ
Page 322 and 323: References 299 Froot, Kenneth A., a
Page 324 and 325: References 301 risiken aus Handelsg
Page 326 and 327: References 303 Investments in Stock
Page 328 and 329: References 305 Institute of Technol
Page 330 and 331: References 307 Sharpe, William F. (
Page 332: References 309 Wall, L.D., and John
Page 335: 312 INDEX Approach (continued) top-
Page 339 and 340: 316 INDEX Credit: derivatives, 178,
Page 341 and 342: 318 INDEX Expectations: homogeneous
Page 343 and 344: 320 INDEX Incentive(s), 22, 33, 45,
Page 345 and 346: 322 INDEX Managers, poorly diversif
Page 347 and 348: 324 INDEX Overinvestment, 75, 79, 8
Page 349 and 350: 326 INDEX Reserve(s) (continued) lo
Page 351 and 352: 328 INDEX Risk, liquidity, 3, 165 R
Page 353 and 354: 330 INDEX Sharpe ratio, 244, 252 Sh
Page 355: 332 INDEX Value at risk (VaR) (cont
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