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

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Index 323 Misperception of the riskiness of a firm, 55, 121 Model(s): internal, 191 macroeconomic (simulation), 208, 211, 216 single factor, 267–269, 291 two-factor: Froot and Stein, 270–272, 278 Merton and Perold, 269–270, 272 Stulz, 271–273, 278 Model, market, 37, 230 Modigliani and Miller. See M&M Money, patient, 146–147 Monitoring, 42–43, 73, 76, 81, 89– 90, 94, 114, 122, 124, 140, 147, 168, 195 Monopoly, 112 Moody’s (Investor Service), 157, 173– 174, 220 Moral hazard, 41, 76, 81, 83, 87, 146 Motivation, 34, 74, 89, 144 Multidimensionality, 132 Negotiation process, 155, 157, 159, 163, 289 Neoclassical (finance) world. See Finance theory, neoclassical Neoinstitutional economics and finance theory. See Finance theory, neoinstitutional Net income, risk-adjusted, 243–245, 251–252 Net position, 26 Net present value (NPV), 11–12, 21, 84, 238 criterion or rule, 11, 14, 22, 134, 247, 279, 291 of wealth, maximization of, 11 New Basle Accord (Basle II), 3, 7, 146, 159, 209, 216, 240 Pillar Three, 285 Noise, reduction of, 88–89 Notional amount, 45 NPV. See also Net present value NPV projects: accepting negative, 82, 93, 247, 262, 290 forgo positive, 95–97, 99, 108, 247 negative, 82, 121, 133, 254, 257, 259 positive, 98, 104, 124, 133, 238, 254, 257, 260, 290 postpone positive, 104 Numerical procedure(s), 182, 185– 186 Objective, interim, 13 Objective function, 29, 113, 262 concave, 85, 87, 91, 100, 112–113, 120 firm’s. See Firm objective function for risk management, 29 value maximization as, 1, 13, 27 VaR as an, 262 Obligations, short-term, 226 Oliver, Wyman & Company, 111, 210, 220 Operational Risk. See Risk, operational Operations: back office, 197 bank’s business, 1–2, 15, 148, 156 changes in, 63, 65, 68–69, 71, 130 discontinuation of bank, 156 international, 26, 55, 244 Option(s), 33, 40, 56, 63, 85–86, 93, 103, 190, 278 call, 93, 222, 227–228 European, 222, 227, 248 delta of, 45, 228 put, 93, 149, 161, 222, 248, 264 European, 248 real, 2, 11 underlying of, 45, 222, 227, 248 Option payoff, 248 Option premium, 124 Option (pricing) theory, 220–221, 225–226, 248 Outcome(s), stochastic, 24 Overhead, allocated, 243 Overhedging, 46, 102–103
324 INDEX Overinvestment, 75, 79, 82, 86, 125 Owner-managers, 140 Ownership: concentration, 82, 91–92, 127 line of equally distributed, 91 P&L. See Profit and loss account Package, bundled, 277, 279 Parameterization, 175, 255 Participation (cost), 29, 73, 80, 93, 114–115 Payment, system, 144 Payoff (structure), 63, 85–86, 89, 154, 168 PD(s). See Probability of default Pecking order theory, 32, 105 Peer group, 140, 162 Perception, (market), 13, 44, 216 of managerial talent, 87 Performance: evaluation, 27, 242 incentives, 85, 89, 246 measurement, 25, 210, 238 measures, 4, 89, 239–241, 253, 274, 284 Period: estimation. See Estimation period holding, 188, 191, 193, 214–215. See also Estimation horizon liquidation, 193, 215 measurement. See Measurement period Perspective. See Point of view Point of view: accounting, 155, 264 bond (or debt) holder, 23, 147 customer, 122 economic, 7, 10, 78, 137, 144–145, 150, 154, 168, 193, 264 empirical, 91 insider, 150 integrated, 4, 26 regulatory, 23, 33, 81, 137, 144– 145, 147–148, 150–151, 154, 161, 163, 192, 236, 289 risk-based, risk-oriented, or riskrelated, 146, 150, 159–160, 240 shareholder, 23, 86, 114 stakeholder, 33–34, 145, 147, 150, 153, theoretical, 21, 34, 43, 137, 146, 236, 240, 242, 287, 289, 291 Portfolio: composition, 28, 122, 288 constitution, 72, 74, 134, 259 diversification. See Diversification investment strategy, 63 perspective, 27, 34 self-financing, 252, 262 theory (modern), 9, 62, 64, 178, 180 unexpected loss, 179 well-diversified, 64, 66, 68–69, 178 Position(s): non-linear, 189–190 short, 189, 228 trading. See Trading position Preferences, nonfinancial, 59, 75 Present value (PV), 2, 11–12, 39, 65, 111, 131, 221 of agency costs: of debt, 123, 288 of equity, 123, 129, 288 of bank equity, 2, 240 of expected financial distress costs, 106, 111–112, 123 of tax payments, 116, 120–121, 123, 125 of transaction costs, 129 Price-setting, 59 Price takers, 58 Pricing factor, second, 271–272 Principal(s), 75, 81, 83, 85–87, 90, 141, 173 Principal-agent: conflict, 83 problems, 90 relationship, 85 Private sector, 145 Probability of bank default. See Likelihood of bank default Probability of default, 43, 76, 80–82, 84, 94–95, 104, 107, 109, 111, 120, 123, 125–126, 147, 160, 172–174, 176, 179, 216, 220, 224–226, 229, 234, 236, 251, 288
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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 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 and 336: 312 INDEX Approach (continued) top-
Page 337 and 338: 314 INDEX Capital: Tier-1, 139, 146
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: 322 INDEX Managers, poorly diversif
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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