Book Details

Optimal Risk-Return Trade-Offs of Commercial Banks

Publication year: 2006

ISBN: 978-3-540-34821-4

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The present book criticizes the fact that profitability measures derived from capital market models such as the Sharpe ratio and the reward-to-VaR ratio are proposed for loan portfolios although it is not assessed whether their risk-return trade-offs are optimal for banks. This volume intends to fill this gap. The approach of this work is to endogenously derive optimal risk-return trade-offs of commercial banks and to compare them with those of reward-to-risk ratios. The risk-return trade-offs for banks are derived taking into account market discipline, Basel I and Basel II regulatory capital requirements, and insured deposits.

Subject: Business and Economics, Basel I, Basel II, Commercial Bank, Loan Portfolio Optimization, Reward-to-Risk Ratio, Risk-Return Trade-Off, linear optimization