Journal ArticleDOI
Theory of risk capital in financial firms
Robert C. Merton,Andre F. Perold +1 more
About:
This article is published in Journal of Applied Corporate Finance.The article was published on 1993-09-01. It has received 377 citations till now. The article focuses on the topics: Economic capital & Financial capital.read more
Citations
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Journal ArticleDOI
An Overview of Value at Risk
Darrell Duffie,Jun Pan +1 more
TL;DR: In this article, a broad and accessible overview of models of value at risk (WR), a popular measure o f the market risk of a financial firm's book, the list of positions in various instruments that expose the firm to financial risk, is presented.
Journal ArticleDOI
Rethinking risk management
TL;DR: The authors argued that the primary goal of risk management is not to dampen swings in corporate cash flows or value, but rather to provide protection against the possibility of costly lower-tail outcomes, situations that would cause financial distress or make a company unable to carry out its investment strategy.
Journal ArticleDOI
A Theory of Bank Capital
TL;DR: In this article, a bank's capital structure affects its liquidity creation and credit-creation functions in addition to its stability, and the consequent trade-offs imply an optimal bank capital structure.
Journal ArticleDOI
Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach
Kenneth A. Froot,Jeremy C. Stein +1 more
TL;DR: In this article, the authors developed a framework for analyzing the capital allocation and capital structure decisions facing financial institutions, which incorporates two key features: value-maximizing banks have a well-founded concern with risk management; and not all the risks they face can be frictionlessly hedged in the capital market.
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Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach
TL;DR: In this paper, the authors developed a framework for analyzing the capital allocation and capital structure decisions facing financial institutions such as banks, which incorporates two key features: value-maximizing banks have a well-founded concern with risk management; and not all the risks they face can be frictionlessly hedged in the capital market.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
Posted Content
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
Journal ArticleDOI
An analytic derivation of the cost of deposit insurance and loan guarantees An application of modern option pricing theory
TL;DR: In this paper, a formula is derived to evaluate the cost of issuing a guarantee of a loan by a third party, and the method used is to demonstrate an isomorphic correspondence between loan guarantees and common stock put options and then to use the well developed theory of option pricing to derive the formula.
Journal ArticleDOI
The value of an option to exchange one asset for another
TL;DR: In this article, the authors developed an equation for the value of the option to exchange one risky asset for another: the investment adviser's performance incentive fee, the general margin account, the exchange offer, and the standby commitment.
Book
On Market Timing and Investment Performance Part I: An Equilibrium Theory of Value for Market Forecasts
TL;DR: In this article, the evaluation of the performance of investment managers is a much-studied problem in finance and the extensive study of this problem could be justified solely on the basis of the manifest function of these evaluations, which is to aid in the efficient allocation of investment funds among managers.