A Capital Adequacy Buffer Model

David Allen, Michael McAleer, Robert Powell and Abhay K. Singh
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Abhay K. Singh: School of Accounting, Finance and Economics, Edith Cowan University

No 2013-33, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

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)
Pages: 15 pages
Date: 2013
Note: The authors wish to thank the Australian Research Council, Edith Cowan University Faculty of Business and Law Strategic Research Fund, and the National Science Council, Taiwan, for financial assistance.
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https://eprints.ucm.es/id/eprint/22757/1/1333.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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