A new approach to optimal capital allocation for RORAC maximisation in banks

Kang, Woo-Young; Poshakwale, Sunil S.

dc.contributor.author	Kang, Woo-Young
dc.contributor.author	Poshakwale, Sunil S.
dc.date.accessioned	2019-06-25T09:18:40Z
dc.date.available	2019-06-25T09:18:40Z
dc.date.issued	2019-06-13
dc.identifier.citation	Kang W-Y, Poshakwale S. (2019) A new approach to optimal capital allocation for RORAC maximisation in banks. Journal of Banking and Finance, Volume 106, September 2019, pp. 153-165	en_UK
dc.identifier.issn	0378-4266
dc.identifier.uri	https://doi.org/10.1016/j.jbankfin.2019.06.006
dc.identifier.uri	http://dspace.lib.cranfield.ac.uk/handle/1826/14258
dc.description.abstract	We introduce a new model for optimal internal capital allocation, which would allow banks to maximize their Return on Risk-Adjusted Capital (RORAC) under regulatory and capital constraints. We extend the single period model of Buch et al., (2011) to a multi-period model and improve its forecasting accuracy by including the debt effect and Bayesian learning innovations. The empirical application shows that our model significantly improves the RORAC of a sample of banks listed in the S&P 500 index.	en_UK
dc.language.iso	en	en_UK
dc.publisher	Elsevier	en_UK
dc.rights	Attribution-NonCommercial-NoDerivatives 4.0 International	*
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/4.0/	*
dc.subject	Regulatory risk	en_UK
dc.subject	Economic capital	en_UK
dc.subject	Optimal capital allocation	en_UK
dc.subject	Banks	en_UK
dc.subject	Euler principle	en_UK
dc.title	A new approach to optimal capital allocation for RORAC maximisation in banks	en_UK
dc.type	Article	en_UK
dc.identifier.cris	23690640