Chapter Twelve
Additional Example for Chapter 12
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Chapter 2
| Additional Example for Chapter 12
Allocation of Loan Portfolios in Different Sectors (%) Sectors National Bank A Bank B Commercial 20% 50% 30% Consumer 40% 20% 40% Real Estate 40% 30% 30% How different are Banks A and B from the national benchmark? When using this example, note that there is an implied assumption that Bank A and B belong to a certain size class or have some common denominator linking them to the national benchmark. If that is the case, then the solution is to estimate the standard deviation. We use Xs to represent the portfolio concentrations. X1, X2 and X3 are the national benchmark percentages Bank A Bank B (X1j - X1 )2 (.50 - .20)2 = 0.09 (.30 - .20)2 = 0.01 (X2j - X2 )2 (.20 - .40)2 = 0.04 (.40 - .40)2 = 0.00 (X3j - X3 )2 (.30 - .40)2 = 0.01 (.30 - .40)2 = 0.01 = 0.3742 or 37.42 percent = 0.1414 or 14.14 percent Thus we can see here that Bank A is significantly different from the national benchmark Download 55 Kb. Share with your friends:
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