Portfolio valuation in banks

David F. Hastings

RAE - Revista de Administração de Empresas, 2001, vol. 41, issue 1

Abstract: Frequent references are made to the use of portfolio spread rates in managing financial risks in banks, but indications as to the procedures for determining such rates are very scant. The purpose of this article is topresent some initial ideas on the subject: a Standard Funding system indicates what each portfolio should have earned, while an Actual Funding system points out what each portfolio did, in fact, earn; additionally,by comparing the outcomes of the two funding systems for each portfolio, it is possible to determine what each portfolio earned (or lost) in the way of arbitrage.

Date: 2001
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