ESCP Europe

This book presents an integrated framework for risk measurement, capital management and value creation in banks. It first discusses different risk types, and how to assess the amount of capital they absorb by means of up-to-date, robust risk-measurement models. Then it surveys regulatory capital requirements with special emphasis on Basel II, its economic foundations and managerial implications. Finally it presents models and techniques to calibrate the amount of economic capital at risk needed by the bank, to fine-tune its composition, to allocate it to risk-taking units, to estimate the fair return expected by shareholders, and to monitor the value creation process.