Académique Documents
Professionnel Documents
Culture Documents
SEEM3580
10
Investors
Corporations
(e.g. households)
Financial claims
(e.g. equity or debt claim)
11
12
Investors
Cash
Financial claims
(may not be the
same as A)
FI
(asset
transformers)
Corporations
Financial
claims (A)
Cash
13
14
16
17
19
Bear Stearns
Lehman Brothers
Citigroup
AIG
21
22
23
Shareholders view
Proper financial risk management (RM) can increase
the value of corporation and hence shareholder value.
Economic capital
The economic capital is the capital that shareholders
should keep to limit the default (bankruptcy)
probability to a given reasonable level (confidence
level) over a given time horizon. A good RM could
reduce this economic capital.
25
26
27
Liabilities
Liabilities
($100M)
($100M)
(Loan A)
(Loan B)
1
Assets
($100M)
0
28
29
1
Assets
Assets
($100M)
($100M)
(Bond A)
(Bond B)
1
2
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33
36
39
40
43
44
45
46
47
48
49
50
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