A Capital Adequacy Buffer Model

David Allen and Michael McAleer

No 13-168/III, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In this paper, we develop a new capital adequacy buffer model (CABM) which is sensitive to dynamic economic circumstances. The model, which measures additional bank capital required to compensate for fluctuating credit risk, is a novel combination of the Merton structural model which measures distance to default and the timeless capital asset pricing model (CAPM) which measures additional returns to compensate for additional share price risk.

Keywords: Credit risk; Capital buffer; Distance to default; Conditional value at risk; Capital adequacy buffer model (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 (search for similar items in EconPapers)
Date: 2013-10-15
New Economics Papers: this item is included in nep-ban, nep-cba and nep-rmg
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https://papers.tinbergen.nl/13168.pdf (application/pdf)

Related works:
Journal Article: A capital adequacy buffer model (2016)
Working Paper: A Capital Adequacy Buffer Model (2013)
Working Paper: A Capital Adequacy Buffer Model (2013)
Working Paper: A Capital Adequacy Buffer Model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20130168

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