Banking Firm, Equity and Value at Risk | Zendy

Удо Бролл | Zendy; Anna L. Sobiech | Zendy; Jack E. Wahl | Zendy

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Banking Firm, Equity and Value at Risk

Author(s) -

Удо Бролл,

Anna L. Sobiech,

Jack E. Wahl

Publication year - 2012

Publication title -

contemporary economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.229

H-Index - 14

ISSN - 1897-9254

DOI - 10.5709/ce.1897-9254.67

Subject(s) - business , equity (law) , equity value , value (mathematics) , enterprise value , financial economics , financial system , monetary economics , economics , finance , debt , mathematics , political science , debt levels and flows , external debt , law , statistics

The paper focuses on the interaction between the solvency probability of a banking firm and the diversification potential of its asset portfolio when determining optimal equity capital. The purpose of this paper is to incorporate value at risk (VaR) into the firm-theoretical model of a banking firm facing the risk of asset return. Given the necessity to achieve a confidence level for solvency, we demonstrate that diversification reduces the amount of equity. Notably, the VaR concept excludes a separation of equity policy and asset-liability management

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