Description
Book SynopsisThe definitive guide to complying with the brand-newBasel III requirements and creating sustainable value
With the Final Standard of Basel III published and implementation deadlines set, there's no better time for the revised and updated edition of the cornerstone resource bankers, bank regulators, auditors, and risk managers worldwide rely on--Bank Valuation and Value-Based Management. Whether you're complying with the new standards of practice, valuing a bank, or searching forsustainable value creation, you can do it quicker and more effectively with the insight only Jean Dermine can offer.
Renowned for his expertise in asset and liabilitymanagement, European financial markets, and banking theory, Dermine provides the most comprehensivereference available on the essence of banking--asset-liability management, with particular focus on an institution's banking book. Along with an in-depth exploration of what drives value in a bank, he equips you with his persona
Table of Contents
Introduction vii
Acknowledgments ix
Chapter 1
Discounting, Present Value, and the Yield Curve 1
Chapter 2
Coupon Bond Rate, Zero-Coupon Bond Rate, Forward Rates, andthe Shape of the Yield Curve 14
Chapter 3
Statistics: A Review 23
Chapter 4
The Economics of Banking and a Bank’s Balance Sheet and Income Statement 32
PART ONE: BANK VALUATION
Chapter 5
The Valuation of Banks, Part 1 44
Chapter 6
The Valuation of Banks, Part 2 70
Chapter 7
Economic and Strategic Drivers of Bank Valuation 93
Chapter 8
Valuation of Fee-Based Activities 110
PART TWO: VALUE-BASED MANAGEMENT
Chapter 9
Value-Based Management in Banking: An Introduction 126
Chapter 10
Fund Transfer Pricing: Foundation and Advanced Approaches 145
Chapter 11
Deposit Pricing and Repurchase Agreements 172
Chapter 12
Capital Regulation (Basel I), Economic Capital Allocation, and Loan
Pricing I (the Equity Spread) 183
Chapter 13
Capital Regulation (Basel II) 200
Chapter 14
Loss Given Default and Provisions on Nonperforming Loans 214
Chapter 15
Loan Pricing II, Loan Loss Provisions on Performing Loans, and Estimates of Probabilities of Default 226
Chapter 16
Securitization 245
PART THREE: RISK MANAGEMENT
Chapter 17
Risk Management in Banking: An Overview 262
Chapter 18
The Control of Interest-Rate Risk on the Banking Book, Part 1:The Earnings at Risk 268
Chapter 19
The Control of Interest-Rate Risk on the Banking Book, Part 2:The Economic Value at Risk 281
Chapter 20
Value at Risk in the Trading Book: The Aggregation of Risks 301
Chapter 21
Liquidity Risk and Value Creation 320
Chapter 22
The Basel III Global Regulatory Framework for More Resilient Banks and Banking Systems 336
Chapter 23
Credit Risk Portfolio Diversification: Credit Value at Risk 346
Chapter 24
Marginal Risk Contribution, Diversification, and EconomicCapital Allocation 369
Chapter 25
Forwards, Futures, Swaps, and Options: Counterparty Risk 384
Chapter 26
Credit Derivatives 404
Chapter 27
Operational Risk 418
PART FOUR: SPECIAL TOPICS
Chapter 28
Islamic Banking, Interest-Free Banking 430
Chapter 29
Prudential Regulations, Safety Nets, and Corporate Structure of International Banks (Branches versus Subsidiaries) 435
Glossary 458
Solutions to Exercises 474
References 497
Index 509
