Valuation and Risk
Capital and Profitability
Risk-weighted assets, the leverage ratio, P&L attribution, KVA and funds transfer pricing.
Introductory1 pagePractitioner3 pagesAdvanced1 page
1Capital and Profitability
- IntroductoryRisk-Weighted Assets (RWA)RWA is the size of a bank's risks expressed as an amount, and it is the denominator of the capital adequacy ratio.
- PractitionerP&L AttributionP&L is split by risk factor to show where it came from and to notice valuation errors or risks that are not captured.
- PractitionerThe Leverage RatioThe numerator is Tier 1 capital and the denominator is assets and transactions measured without risk weights, so the ratio complements the risk-based capital adequacy ratio.
- AdvancedCapital Valuation Adjustment (KVA)KVA is the present value of the cost of the regulatory capital held until maturity, and it lowers the value.
- PractitionerFunds Transfer Pricing (FTP)FTP is an internal system for measuring business-line profitability and for dividing responsibility for funding.