International Finance and Accounting Handbook

8 • 20 MARKET RISK Panel A: FI Holdings and Risk Charges Specific Risk General Market Risk (1) (2) (3) (4) (5) (6) (7) Time Band ...

column 6—to determine the general market risk charge of $66 for the whole fixed- income portfolio. (iii) Vertical Offsets. The B ...

(iv) Horizontal Offsets within Time Zones. In addition, the debt trading portfolio is divided into three maturity zones: 1 (1 mo ...

ement and (2) a market, or systematic, risk element. The BIS charges for unsystem- atic risk by adding the long and short positi ...

8 • 24 Under the proposed two-part calculation, there would be separate requirements for the position in each individual equity ...

with a minimum value of 3 (i.e., Capital charge
(DEAR)×() ×(3)). In general, the multiplication factor makes required capital s ...

8.8 SUMMARY. In this chapter we analyzed the importance of measuring an FI’s market risk exposure. This risk is likely to contin ...

9 • 1 CHAPTER 9 VALUATION IN EMERGING MARKETS Aswath Damodaran New York University CONTENTS 9.1 Introduction 2 9.2 Estimating Di ...

9.1 INTRODUCTION. The principles of valuation do not change when you are valuing emerging market companies. In particular, the v ...

to be estimated for periods ranging from one to ten years. A purist’s view of risk-free rates would then require different risk- ...

obtain for periods beyond a year^2 for many of the emerging markets, where we would be most interested in using them. You could ...

from price inflation. To be consistent, the discount rates used in these cases have to be real discount rates. To get a real exp ...

ured and compensated. In fact, it is this view of risk that leads models of risk to break the risk in any investment into two co ...

timated and compared to the actual returns earned on a default-free asset (usually government security). The difference, on an a ...

If it is difficult to estimate a reliable historical premium for the U.S. market, it be- comes doubly so when looking at markets ...

But diversified away by whom? Equity in a Brazilian or Malaysian firm can be held by hundreds or thousands of investors, some of ...

of the factors that drive equity risk—the stability of a country’s currency, its budget and trade balances, and its political st ...

In some cases, analysts add the default spread to the U.S. risk premium and multiply it by the beta. This increases the cost of ...

uity markets because the markets are illiquid. This approach will understate the eq- uity risk premiums in those markets. The se ...

(vi) Choosing between the Approaches. The three approaches to estimating country risk premiums will generally give you different ...