Indexed by:期刊论文

Date of Publication:2016-04-22

Journal:SPRINGERPLUS

Included Journals:SCIE、PubMed、SSCI、Scopus

Volume:5

Issue:1

Page Number:500

ISSN No.:2193-1801

Key Words:Capital to risk asset ratio; Basel accord; CreditMetrics; Chance constraint

Abstract:This paper deals with a capital to risk asset ratio chance-constrained optimization model in the presence of loans, treasury bill, fixed assets and non-interest earning assets. To model the dynamics of loans, we introduce a modified CreditMetrics approach. This leads to development of a deterministic convex counterpart of capital to risk asset ratio chance constraint. We pursue the scope of analyzing our model under the worst-case scenario i.e. loan default. The theoretical model is analyzed by applying numerical procedures, in order to administer valuable insights from a financial outlook. Our results suggest that, our capital to risk asset ratio chance-constrained optimization model guarantees banks of meeting capital requirements of Basel III with a likelihood of 95 % irrespective of changes in future market value of assets.