February 2007
Intermediate to advanced
280 pages
15h 37m
English
Content preview from Value at Risk and Bank Capital Management
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CHAPTER
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2
What Is “Capital” Management?
Questions such as “How much capital is required to cover potential losses deriving from
the risks we are undertaking?,” “What is the risk-adjusted return on capital produced by
each business unit and by each product?,” and “How should capital be allocated within
business units?” are crucial for any bank. Yet before discussing them, the word capital
must be defi ned. In fact, there are different notions of capital and different capital con-
straints that the bank should satisfy at the same time.
One well-known distinction is between regulatory capital and economic capital.
Required regulatory capital is ca ...
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