Capital Adequacy is a Balance Sheet Ratio Financial analysts analyze company performance with different sets of ratios; e.g., earnings per share, return on equity. As a ratio, capital adequacy is just a special solvency ratio, not greatly unlike the classic debt-to-equity ratio. But capital adequacy connotes a financial institution’s capital, so it’s really a bank-specific
Introduction The Financial Risk Manager (FRM) introduces binomial trees by applying them to value derivatives for two asset classes, equities and bonds. For stock options, the text is John Hull’s Options, Futures and Derivatives; for bonds, the text is Bruce Tuckman’s Fixed Income Securities. Both are excellent and have been assigned in the syllabus for
According to Schroeck, economic capital is an estimate of the overall level of capital necessary to guarantee the solvencyof the bank at some predetermined confidence level. Which stakeholder tranche represents the “critical threshold” targeting by this confidence level?