In their 2001 Journal of Risk and Insurance article, Stewart C. Myers and James A.Read, Jr., propose to use a specific capital allocation method for pricing insurancecontracts. We show that in their model framework no capital allocation to lines ofbusiness is needed for pricing insurance...

We characterize a firm as a nexus of activities and projects with their associated cashflows. Production and operations activities and real risk management activities distribute cashflows over states of nature and time periods, leading to a transformation possibility frontier similar to a...

Measuring value creation by comparing the RAROC of an exposure (the return on risk capital) with a single institution-wide hurdle rate is inconsistent with the standard theory of financial valuation. We use asset pricing theory to determine the appropriate hurdle rate for such a RAROC...

We characterize a firm as a nexus of activities and projects with their associated cashflow distributions across states of the world and time. With specialized managers intent on maximizing firm value, we show that such a representation leads to a transformation possibility frontier between the...

Measuring value creation by comparing the RAROC of an exposure (the return on risk capital) with a single institution-wide hurdle rate is inconsistent with the standard theory of financial valuation. We use asset pricing theory to determine the appropriate hurdle rate for such a RAROC...

We disentangle different driving factors of sovereign bond market integrationby studying yield co-movements of EMU countries, the UK, the US and 16German L¨ander in the last 15 years. At a low frequency of weeks, bondmarket integration has increased gradually in the course of the last 15 years...

The paper discusses several central issues of a RAPM-approach: Virtual risk adjusted capital (VRAC) on the company level, return on risk adjusted capital (RORAC), risk based capital allocation to business segments, RAPM for business segments. RORAC-based premium principles are presented and...

This paper investigates how investors who face both equity risk and credit risk would optimally allocate their financial wealth in a dynamic continuous-time setup.