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Microeconometrics of BankingMethods, Applications, and Results$
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Hans Degryse, Moshe Kim, and Steven Ongena

Print publication date: 2009

Print ISBN-13: 9780195340471

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195340471.001.0001

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Managing Risks in the Banking Firm

Managing Risks in the Banking Firm

Chapter:
(p.164) 8 Managing Risks in the Banking Firm
Source:
Microeconometrics of Banking
Author(s):

Hans Degryse

Moshe Kim

Steven Ongena

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195340471.003.0008

This chapter discusses the empirical management of risks in the banking firm. In terms of methodology, it broaches the assumptions, estimation approaches, and issues of the value at risk and credit-risk measurement models. It also discusses evidence on default or credit risk, liquidity risk, and market risk. Banks should keep sufficient capital as a buffer against unexpected losses. This capital management reflects both economic capital (what banks would voluntarily hold) and regulatory capital (as required by regulators). Financial institutions decide on their on-balance- and off-balance-sheet activities. The off-balance-sheet management is also important for banks as often assets and liabilities are contingent, implying that many risks are not visible on the books but are latently present off the books.

Keywords:   banking firm, credit risk, liquidity risk, market risk, capital management

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