We sketch a framework to theoretically identify the components of the value that a bank should attach to a deal and how to charge them to the relevant departments and/or to the final counterparty (client) by an internal transfer pricing system

Prudent credit risk management within a bank requires that a number of agents within the firm communicate, agree and act in a concerted fashion to manage credit risk both at the individual exposure level and at the broader portfolio level. This can be challenging given the nature of credit...