capital allocation, portfolio enhancement and …（资本配置、组合增强和u2026）.pdf

Capital Allocation, Portfolio Enhancement and Performance Measurement : A Unified Approach *) Winfried G. Hallerbach **) April 30, 2003 *) I’d like to thank participants of the EURO Working Group on Financial Modeling (Haarlem), and Quantitative Methods in Finance (Sydney) conferences for their valuable feedback. Of course, the usual disclaimer fully applies. **) Dept. of Finance, Erasmus University Rotterdam, POB 1738, NL-3000 DR Rotterdam, The Netherlands, phone +31.10.408-1290, facsimile +31.10.408-9165, hallerbach@few.eur.nl , home page: http://www.few.eur.nl/few/people/hallerbach/, see also http://www.finance-on-eur.nl. Abstract Risk analysis, economic capital allocation and performance evaluation are crucial steps in the process of enterprise-wide risk management. Capital-at-Risk (CaR) plays a central role since it determines the amount of economic capital that is required to support firm-wide consolidated risks and it is the key ingredient of risk-adjusted return (RAROC) measures. The existing literature, however, offers various definitions of RAROC. In addition most approaches assume a joint-elliptical world. Especially in the context of credit risk, where loss distributions are skewed, this is not realistic. Moreover this leads to biases in estimating the risk contributions of portfolio components and in determining the sub- sequent allocation of economic capital. In this paper we study capital allocation and risk-adjusted performance measurement (RAPM) in a coherent and non-parametric framework. Our results can readily be used in a simulation context and serve as a benchmark to evaluate the corresponding CreditMetrics, CreditRisk+ and KMV approaches. We first discuss the allocation of economic capital over business units or portfolio