Successful bank operation requires managers to weigh complex trade-offs between growth, return, and risk. In recent years banks increasingly have adopted innovative performance metrics based on the concept of economic profit, rather than accounting earnings to assist managers in making such...

Diversification is certainly the simplest and perhaps the oldest approach to managing the trade-off between portfolio risk and return. Because diversification tends to reduce risk without a proportional reduction in returns, an overwhelming majority of commercial banks have diversified...

In banking over the past 10 years, management accountants have been instrumental in the creation of new management processes and performance systems. Their innovations have enabled banks to create internal capital markets, measure risks so as to facilitate their proper hedging and pricing, and...

The introduction by the U.S. Treasury of inflation-indexed notes was one of the most widely publicized innovations in the U.S. capital markets in recent years. Since their introduction in January 1997, $57 billion in 5-, 10-, and 30-year Treasury Inflation-Protected Securities (TIPS) has been...

Risk management has received increasing attention in recent years, both from academics and from practitioners. The heightened interest is the result of a number of coincident secular trends, including increased investment in volatile emerging markets and the growing role of capital markets in...