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Risk capital allocation for RORAC optimization

Buch, Arne and Dorfleitner, Gregor and Wimmer, Maximilian (2011) Risk capital allocation for RORAC optimization. Journal of Banking & Finance 35 (11), pp. 3001-3009.

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Other URL: http://www.sciencedirect.com/science/article/B6VCY-52JKSRW-2/2/9d1a730c6f03ce106f613197e802a2bf


Abstract

This paper considers the financial optimization problem of a firm with several sub-businesses striving for its optimal RORAC. An insightful example shows that the implementation of classical gradient capital allocation can be suboptimal if division managers are allowed to venture into all business whose marginal RORAC exceeds the firm's RORAC. The marginal RORAC requirements are refined by adding ...

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Item Type:Article
Date:30 August 2011
Institutions:Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzierung (Prof. Dr. Gregor Dorfleitner)
Research groups and research centres:Immobilien- und Kapitalmärkte
Identification Number:
ValueType
10.1016/j.jbankfin.2011.04.001DOI
Classification:
NotationType
C61Journal of Economics Literature Classification
D81Journal of Economics Literature Classification
D82Journal of Economics Literature Classification
G21Journal of Economics Literature Classification
G22Journal of Economics Literature Classification
Keywords:Risk capital; Economic capital; Capital allocation; Gradient allocation; Euler allocation; RORAC
Subjects:300 Social sciences > 330 Economics
Status:Published
Refereed:Yes, this version has been refereed
Created at the University of Regensburg:Yes
Owner: Dr. Maximilian Wimmer
Deposited On:07 Dec 2009 12:41
Last Modified:13 Mar 2014 17:54
Item ID:11261
Owner Only: item control page

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