EVA/RAROC vs. MCEV Earnings: A Unification Approach

Kraus, Christian

doi:10.1057/gpp.2012.5

Cited by 4 publications

(2 citation statements)

References 37 publications

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“…For a one-year risk capital measure, two popular risk-adjusted performance measures are EcVA and RORAC. In our article, we use the following definitions (for an extended discussion, refer to Kraus, 2012):…”

Section: Embedding the Multi-year Risk Capital Concept In Value-based Managementmentioning

confidence: 99%

A multi‐year risk capital concept for internal models and enterprise risk management

Diers

2012

The Journal of Risk Finance

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Purpose -The purpose of this paper is to illustrate how risk capital can be calculated and allocated in a multi-year context. This is an important issue, since strategic management and decision making within insurance companies require a multi-year time horizon (instead of a one-year time horizon, as set out in solvency models). Design/methodology/approach -After defining risk capital in a multi-year context, the paper discusses the different properties of the multi-year risk capital concept. The paper also presents an allocation rule of how to allocate the multi-year risk capital to individual years as well as to individual segments. The paper applies the author's model framework in an application study to illustrate the different effects. Findings -The paper shows how multi-year risk capital can be used as a basis for analyzing different management strategies within risk and return indicators in the context of value-based management. Furthermore, the paper demonstrates the effect of allocating risk capital in a multi-year context. Originality/value -The analysis provides new and relevant information to insurance companies' management. Whereas usually solvency rules set out a time horizon of one year, in the context of internal risk models a multi-year planning horizon is taken into account. Management needs to get an idea of how much risk capital is necessary in order to survive the next five years without external capital supply. The paper presents an answer to these questions.

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Section: Embedding the Multi-year Risk Capital Concept In Value-based Managementmentioning

confidence: 99%

A multi‐year risk capital concept for internal models and enterprise risk management

Diers

2012

The Journal of Risk Finance

View full text Add to dashboard Cite

show abstract

“…Since then many authors have been dealing with this tool, and if EVA is mentioned as a profitability measure in financial institutions (usually as an alternative to widely used RAROC) other authors and publications are actually referring to this article (like Schroeck, 2002 or Stoughton andZechner, 2004). Kraus (2013) further compares various tools used for value-based management in life and non-life insurance business and finally recommends usage of tools based on discounted cash flow such as Market Value Added or Market Consistent Embedded Value.…”

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confidence: 99%

Using Economic Value Added in Ex-Ante Profitability Calculation of Bank´s Medium-Sized Clients

Křečková¹

2018

Prague Economic Papers

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This article deals with the calculation of bank´s medium-sized enterprises clients´ ex-ante profitability and the possibility to use Economic Value Added (EVA) tools in such calculation instead of, currently in bank sector, widely used measure of Risk Adjusted Return on Capital (RAROC). Using a sample of medium-sized enterprises clients to whom a credit exposure was approved in one of the banks operating on the bank´s market within a country belonging to the European Union, the expected profitability of these clients was compared by using firstly RAROC and then compared the results to the profitability calculation using EVA tool on the same set of data. Although both measures (RAROC and EVA) are based on the same initial variables, the results of profitability measure show different outcomes in terms of clients´ profitability level and thus their contribution to the total clients´ portfolio profitability. Using EVA tool instead of RAROC measurement thus could help bank´s relationship managers and branch managers focus on those clients creating larger value added than others.

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Value Creation and Solvency: A Simple Approach to Deriving a Non-Life Insurer’s Optimal Growth Strategy

Schmautz¹

2015

Geneva Pap Risk Insur Issues Pract

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EVA/RAROC vs. MCEV Earnings: A Unification Approach

Cited by 4 publications

References 37 publications

A multi‐year risk capital concept for internal models and enterprise risk management

A multi‐year risk capital concept for internal models and enterprise risk management

Using Economic Value Added in Ex-Ante Profitability Calculation of Bank´s Medium-Sized Clients

Value Creation and Solvency: A Simple Approach to Deriving a Non-Life Insurer’s Optimal Growth Strategy

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