Authors: Hovik Tumasyan
Addresses: Ernst & Young LLP, One More London Place, London SE1 2AF, UK
Abstract: The paper studies modifications to transfer pricing frameworks in banks from the stand-point of correct implementation of risk-adjusted performance measures that aligns the performance goals of the business units with the strategic risk taking views of the bank as a whole. Along these lines the transfer pricing rate for risk capital and the so-called equity credit rate are calculated explicitly.
Keywords: risk-adjusted performance measures; funds transfer pricing; economic capital; risk capital allocation; shareholder value; RAROC; cost of equity capital; banking; equity credit rate.
International Journal of Services Sciences, 2009 Vol.2 No.1, pp.83 - 97
Published online: 11 Dec 2008 *Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article