This paper provides a model for allocating capital and measuring performances for financial institutions. The methodology relates the economic valuation of the balance sheet to the market value of the firm. In so doing, each business unit is evaluated on an economic basis, and the capital allocated to these units is related to the risk premiums that the market demands. The paper's results have broad applications for corporate managers, risk managers, and other market participants in managing financial institutions to increase shareholders' value.
Publication: Research Paper
Authors: HO Thomas S.Y.
