Risk management, capital budgeting, and capital structure policy for financial institutions: an integrated approach

• 成果类型: Article
• 署名作者: Froot, KA; Stein, JC
• 署名单位: Massachusetts Institute of Technology (MIT); Harvard University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(97)00037-8
• 发表日期: 1998
• 页码: 55-82
• 关键词: Risk management; Financial institutions; capital allocation

摘要

We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions. Our model incorporates two key features: (i) value-maximizing banks have a well-founded concern with risk management; and (ii) not all the risks they face can be frictionlessly hedged in the capital market. This approach allows us to show how bank-level risk management considerations should factor into the pricing of those risks that cannot be easily hedged. We examine several applications, including: the evaluation of proprietary trading operations, and the pricing of unhedgeable derivatives positions. We also compare our approach to the RAROC methodology that has been adopted by a number of banks. (C) 1998 Elsevier Science S.A. All rights reserved.