Lecture Notes in Economics and Mathematical Systems

Optimal Risk-Return Trade-Offs of Commercial Banks

and the Suitability of Profitability Measures for Loan Portfolios

Authors: Kühn, Jochen

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About this book

The present book criticizes the fact that profitability measures derived from capital market models such as the Sharpe ratio and the reward-to-VaR ratio are proposed for loan portfolios although it is not assessed whether their risk-return trade-offs are optimal for banks. This volume intends to fill this gap.

The approach of this work is to endogenously derive optimal risk-return trade-offs of commercial banks and to compare them with those of reward-to-risk ratios. The risk-return trade-offs for banks are derived taking into account market discipline, Basel I and Basel II regulatory capital requirements, and insured deposits.

It is found that even the reward-to-VaR ratio, which is explicitly developed for the purpose of valuating loan portfolios, can be highly misleading. The volume also helps in understanding risk management motives of banks, in particular, how market discipline, capital requirements, and insured deposits affect the decision-making of banks.

Table of contents (9 chapters)

Table of contents (9 chapters)
  • Introduction

    Pages 1-5

  • Risk Measures

    Pages 7-22

  • Asset Pricing

    Pages 23-31

  • Reward-to-Risk Ratios

    Pages 33-43

  • Effects of Risk-Taking in Commercial Banks

    Pages 45-59

Buy this book

eBook $79.99
price for USA in USD (gross)
  • ISBN 978-3-540-34821-4
  • Digitally watermarked, DRM-free
  • Included format: PDF
  • ebooks can be used on all reading devices
  • Immediate eBook download after purchase
Softcover $99.99
price for USA in USD
  • ISBN 978-3-540-34819-1
  • Free shipping for individuals worldwide
  • Usually dispatched within 3 to 5 business days.
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Bibliographic Information

Bibliographic Information
Book Title
Optimal Risk-Return Trade-Offs of Commercial Banks
Book Subtitle
and the Suitability of Profitability Measures for Loan Portfolios
Authors
Series Title
Lecture Notes in Economics and Mathematical Systems
Series Volume
578
Copyright
2006
Publisher
Springer-Verlag Berlin Heidelberg
Copyright Holder
Springer-Verlag Berlin Heidelberg
eBook ISBN
978-3-540-34821-4
DOI
10.1007/3-540-34821-2
Softcover ISBN
978-3-540-34819-1
Series ISSN
0075-8442
Edition Number
1
Number of Pages
IX, 152
Topics