When only the best will do: best practices in capital allocation

Article Abstract:

The risk-adjusted performance measure (RAPM) serves as one of the best approaches used to allocate capital. The measure, which is based on value-at-risk methodology, creates a consistent assessment tool that evaluates and compares risk-adjusted returns among asset classes or lines of business. When used in conjunction with stress testing and sensitivity analysis, a RAPM approach offers firms a more precise assessment of the risks they confront and identifies the likelihood such risks will take place.

Financial Services, Finance and Insurance, Methods, Management, Risk assessment, Risk management, Capital

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Economies of diversification in the banking industry: a frontier approach

Article Abstract:

The report calculates economies of diversification by analysing the cost effect of banking expansions by using a frontier cost approach. The research was based on parametric techniques for measuring economies of scope. Nonparametric techniques separated the effects of product inefficiency, scale effects and product mix effects. Results show that increased competition would result in improved efficiency in the banking sector.

Regulation misc. commercial sectors, Research, Banking industry, Diversification in industry, Industrial diversification

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