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

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dc.contributor.authorKang, Woo-Young
dc.contributor.authorPoshakwale, Sunil S.
dc.date.accessioned2019-06-25T09:18:40Z
dc.date.available2019-06-25T09:18:40Z
dc.date.issued2019-06-13
dc.description.abstractWe 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.identifier.citationKang 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. 153-165en_UK
dc.identifier.cris23690640
dc.identifier.issn0378-4266
dc.identifier.urihttps://doi.org/10.1016/j.jbankfin.2019.06.006
dc.identifier.urihttp://dspace.lib.cranfield.ac.uk/handle/1826/14258
dc.language.isoenen_UK
dc.publisherElsevieren_UK
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International*
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/*
dc.subjectRegulatory risken_UK
dc.subjectEconomic capitalen_UK
dc.subjectOptimal capital allocationen_UK
dc.subjectBanksen_UK
dc.subjectEuler principleen_UK
dc.titleA new approach to optimal capital allocation for RORAC maximisation in banksen_UK
dc.typeArticleen_UK

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