Practical portfolio investment problems under uncertainty can be modeled well as multi-period stochastic programs. However, the numerical optimization methods which need to be used to solve such models seriously limit the level of detail in the uncertainty about future asset prices and returns...

We introduce a new performance scheme for banks, inspired by the Du Pont scheme for corporates, which clarifies the relationship between return on equity (RoE), risk-adjusted return on capital (RAROC) and return on assets (RoA). The scheme highlights how common financial ratios risk factors...

To measure performance of individual businesses and maximize shareholder value for the firm as a whole, banks need to decide how much capital to allocate to each business and what cost of capital to charge. Capital is typically allocated to reflect differences in risks and/or regulatory capital...

As regulatory capital constraints in recent years have become more binding and less risk sensitive, banks are evaluating how they need to change their mix of businesses to ensure attractive returns to their shareholders. In this paper we analyze what the optimal choice of business lines is for a...

We introduce a new performance scheme for banks, inspired by the Du Pont scheme for corporates, which clarifies the relationship between return on equity (ROE), risk-adjusted return on capital (RAROC) and return on assets (ROA). The scheme highlights how common financial ratios as well as risk...

We model 1927-1997 U.S. business failure rates using a time series approach based on unobserved components. Clear evidence is found of cyclical behaviour in default rates. The cycle has a period of around 10 years. We also detect longer term movements in default rates and default correlations....

In this paper we empirically compare a wide range of different term structure models when it comes to the pricing and, in particular, hedging of caps and swaptions. We analyze the influence of the number of factors on the hedging and pricing results, and investigate which type of data...

In the literature on stochastic programming models for practical portfolio investment problems, relatively little attention has been devoted to the question how the necessarily approximate description of the asset-price uncertainty in these models influences the optimal solution. In this paper...