Those who triumph compute at their headquarters a great number of factors prior to a challenge. Little computation brings defeat. How much more so with no computation at all!
—Sun Tzu, c.490 BC, Chinese military strategist
Basel II has been a catalyst for many banks to revisit their market and credit risk management. Flattening yield curves and consolidation in the banking market has meant that the treasury functions within a bank are often asked to help with the formulation of strategy. Risk budgeting based on return on economic capital has become a key platform for capital allocation decisions.
This chapter will describe some of the ways the treasury assists ...