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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Half as many cheers - the multiplier reviewed |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | No |
| Status | Published in final form |
| Language |
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| Journal Title | Wilmott Magazine |
| Publisher | Wilmott |
| Geographical Reach | international |
| ISSN | 1540-6962 |
| Volume | 2 |
| Number | 2 |
| Page Range | 104 - 107 |
| Date | 2002 |
| Abstract Text | The financial industry puts the Basle Committee under strain to align regulatory capital with economic capital. This could be reached by allowing more flexibility in the choice of risk measure for regulatory reporting. Markus Leippold and Paolo Vanini show that if banks could use the theoretically more sound risk measure of Expected Shortfall, the three cheers of Stahl (1997) would be reduced to exactly half as many cheers. This would substantially decrease the regulatory capital in most cases. There is no dispute on the necessity of regulating the financial industry. Ideally, a regulation aims at maintaining and improving the safety of the financial industry. At the root of every regulation framework lies the basic idea of calculating a capital reserve as a function of the firm’s total capital and its risk. While the calculation of the firm’s capital is tedious but feasible, the measurement of risk is a difficult task. Consequently, regulators advocate normative and simplified rules applicable to all financial institutions. |
| Free access at | Related URL |
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| Other Identification Number | merlin-id:8820 |
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