Organising the allocation
Capital allocation is an important quantitative methodology that affects a bank’s risk-taking behaviours and business strategies. Yadong Li, Marco Naldi, Jeffrey Nisen and Yixi Shi propose a new capital allocation method that offers stability, fairness, computational efficiency and better business incentives, when compared with existing methods
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In the wake of the financial crisis of 2008, regulators around the globe started to strengthen regulatory capital requirements, aiming to limit systemic risk by reining in the aggressive risk-taking behaviours of banks. Under the tightened regulations, banks are required to raise more capital than in the precrisis era to support similar business activities. In response
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