Porteous, Bruce and Tapadar, Pradip (2008) The Impact of Capital Structure on Economic Capital and Risk Adjusted Performance. ASTIN Bulletin, 38 (1). pp. 341-380. ISSN 0515-0361 .
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| Official URL http://dx.doi.org/10.2143/AST.38.1.2030416 |
Abstract
The impact that capital structure and capital asset allocation have on financial services firm economic capital and risk adjusted performance is considered. A stochastic modelling approach is used in conjunction with banking and insurance examples. It is demonstrated that gearing up Tier 1 capital with Tier 2 capital can be in the interests of bank Tier 1 capital providers, but may not always be so for insurance Tier 1 capital providers. It is also shown that, by allocating a bank or insurance firm’s Tier 1 and Tier 2 capital to higher yielding, more risky assets, risk adjusted performance can be enhanced. These results are particularly pertinent with the advent of the new Basel 2 and Solvency 2 risk based capital initiatives, for banks and insurers respectively.
| Item Type: | Article |
|---|---|
| Uncontrolled keywords: | asset allocation; capital gearing; economic capital; financial services firms risk adjusted performance; stochastic models; Tier 1 and Tier 2 capital |
| Subjects: | Q Science > QA Mathematics (inc Computing science) |
| Divisions: | Faculties > Science Technology and Medical Studies > School of Mathematics Statistics and Actuarial Science > Actuarial Science |
| Depositing User: | Pradip Tapadar |
| Date Deposited: | 18 Apr 2009 09:27 |
| Last Modified: | 19 Aug 2009 11:36 |
| Resource URI: | http://kar.kent.ac.uk/id/eprint/14620 (The current URI for this page, for reference purposes) |
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