Author : Mr.Peter Breuer
Publisher : International Monetary Fund
ISBN 13 : 1451874391
Total Pages : 38 pages
Book Rating : 4.4/5 (518 download)
Book Synopsis Measuring off-Balance-Sheet Leverage by : Mr.Peter Breuer
Download or read book Measuring off-Balance-Sheet Leverage written by Mr.Peter Breuer and published by International Monetary Fund. This book was released on 2000-12-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The simultaneous unwinding of leveraged positions can trigger financial market turbulence. Although balance-sheet measures of leverage are available, it is useful to construct a measure of leverage that incorporates both on- and off-balance-sheet activities. This paper provides measures of leverage implicit in derivative contracts by decomposing the contracts into cash market equivalent components. A leverage ratio can then be calculated for this replicating portfolio, which consists of own funds (equity) and borrowed funds equivalents (debt). Methods for aggregating leverage by institution and by markets are presented. The interaction between leverage and risk is discussed, and a modified capital adequacy ratio is calculated, which captures off-balance-sheet exposure.