The paper focuses on the interaction between the solvency probability of a banking firm and the diversification potential of its asset portfolio when determining optimal equity capital. The purpose of this paper is to incorporate value at risk (VaR) into the firm-theoretical model of a banking...

When measuring market risk, credit institutions and Alternative Investment Fund Managers may deviate from equally weighting historical data in their Value-at-Risk calculation and instead use an exponential time series weighting. The use of exponential weighting in the Value-at-Risk calculation...