Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105436
Authors: 
Broll, Udo
Sobiech, Anna
Wahl, Jack E.
Year of Publication: 
2012
Citation: 
[Journal:] Contemporary Economics [ISSN:] 2084-0845 [Publisher:] Vizja Press & IT [Place:] Warsaw [Volume:] 6 [Year:] 2012 [Issue:] 4 [Pages:] 50-53
Abstract: 
The paper focuses on the interaction between the solvency probability of a banking firm and the diversification potential of its asset portfolio when determining optimal equity capital. The purpose of this paper is to incorporate value at risk (VaR) into the firm-theoretical model of a banking firm facing the risk of asset return. Given the necessity to achieve a confidence level for solvency, we demonstrate that diversification reduces the amount of equity. Notably, the VaR concept excludes a separation of equity policy and asset-liability management.
Subjects: 
financial markets
equity capital
banking
value at risk (VaR)
diversification
risk management
asset-liability management
JEL: 
G21
G28
Persistent Identifier of the first edition: 
Document Type: 
Article
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