Bank value riskiness and management

Abstract

In bank value calculations usually great attention is giving to so called discounted cash flows method. Here financial risk estimation taking in to account only by discount rate. This is very general assumption, in which theoretically should be reflected all possible and probable risks. In modeling bank value dynamic’s that’s not enough, because all business risks have individual and changeable probabilities. Business risks, which used in business valuation, are without adequate estimation of probabilities. Trying to achieve increased bank value should base on researches, in which by modeling we obtain possibilities for value increase based on value and they risk optimal relationship criterion. The aim of this research is to obtain impact of changing riskiness of different business risk drivers on bank value, and to obtain impact of interdependence of different business risk drivers on bank value. The results we expressed with probability density function of bank value variable. Research results show that increase of bank value as the goal could and should be analyzed together with value variable probability, i.e. with value risk criterion.