Ciclo de Conferencias: Reacting to the crisis: the new regulatory environment. En colaboración con el Instituto de Empresa
Vicente Salas
Universidad de Zaragoza
Madrid, 14 de marzo de 2011
11. Two investment projects financed with equity A B 100 100 120 100 150 40 1/2 1/2 1/2 1/2 Expected return= 10% Standard Deviation 7.07% Expected return= -5 % Standard Deviation 39% Investment Final pay-offs
12. Project finance: 80% debt, 20% equity Share- holders Debt- holders Pro. A Pro. B Pro. A Pro. B Good 40 70 80 80 Bad 20 0 80 40 Expected 30 35 80 60 Return 50% 75% 0 -25%
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14. RRC ROE i i L high L low E (RRC) Effects of leverage L within regulatory Capital on expected return and risk E(ROE(La)) E(ROE(Lb)) 0 Sd(ROE)=(1+L)Sd(RRC) RCC = Return on regulatory capital i= cost of debt ROE=RRC+(RRC-i)L
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18. TFP of Spanish banks before and after the euro (dark line) controlling for banks’ characteristics (constant average growth rate 3%)