This paper reports estimates of the long-run costs and benefits of banks funding more of their assets with loss-absorbing capital, or equity. Measuring those costs requires careful consideration of a wide range of issues about how shifts in funding affect required rates of return and on how...

Capital allocation is used for many purposes in financial institutions and for this purpose several methods are known. The aim of this paper is to review possible methods (we present six of them) and to help financial companies to choose between the methods. There are some properties that an...

This paper reports estimates of the long-run costs and benefits of banks funding more of their assets with loss-absorbing capital, or equity. Measuring those costs requires careful consideration of a wide range of issues about how shifts in funding affect required rates of return and on how...