Erschienen:
Cambridge, Mass: National Bureau of Economic Research, January 1996
Erschienen in:NBER working paper series ; no. w5403
Umfang:
1 Online-Ressource
Sprache:
Englisch
DOI:
10.3386/w5403
Identifikator:
Reproduktionsnotiz:
Hardcopy version available to institutional subscribers
Entstehung:
Anmerkungen:
Mode of access: World Wide Web
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Beschreibung:
We develop a framework for analyzing the capital allocation and capital structure decisions facing financial institutions such as banks. Our model incorporates two key features: i) value-maximizing banks have a well-founded concern with risk management; and ii) not all the risks they face can be frictionlessly hedged in the capital market. This approach allows us to show how bank-level risk management considerations should factor into the pricing of those risks that cannot be easily hedged. We examine several applications, including the evaluation of proprietary trading operations, and the pricing of unhedgeable derivatives positions