Risk Books Managing and Measuring Capital: For Banks and Financial Institutions

There are two main parts to this book. The first part is concerned with the general issues of capital management, allocation, risk attribution and performance determination. The second part focuses on the measurement of capital. The book is essential for all who witnessed the devastating effects of the crisis, due fundamentally to undercapitalisation. The current capital regime has turned out to be seriously flawed whether it was intentional or not, and whether or not regulators played an important role in creating this crisis. The call for regulatory reform is an open-ended endeavor. The book is made up of the following two parts, namely, Part I: Managing Capital and Part II: Measuring Capital, with several sections under each part. Important goals of the book: 1. Assess the role of capital in the banking and financial industry. 2. Assess the impact of capital to risk-taking behavior in the financial industry. 3. Determine the amount of risk capital necessary for financial institutions to remain solvent in both normal markets and stressed conditions. 4. Discuss the role of regulatory capital requirements and current supervisory proposals to increase capital requirements from all fronts. 5. Assess the role of economic capital in a capital management framework. 6. Discuss the importance of liquidity management in capital management. 7. Discuss the development and measurement of risk-based capital standards. 8. Develop methodologies for measuring bank capital under stressed markets. 9. Discuss the importance, as well as the shortcomings, of stress testing and scenario analysis in capital measurement and management. 10. Provide guidance on capital and performance management: capital allocation, risk attribution and performance measurement. 11. Provide both qualitative (i.e., management) and quantitative (i.e., measurement) guidance on topics related to capital. This book simultaneously incorporates both management and measurement, while aiming to provide internal and regulatory guidance for methodologies, allocation and performance assessment of capital. Furthermore, it also attempts to address deficiencies in the current capital regime that are alleged to be the root causes of the current credit crisis. Essentially, this book is well timed, covering a topic of necessity.