Investopedia

Continue to Site »

McDonough Ratio

Filed Under »
Dictionary Says

Definition of 'McDonough Ratio'

A ratio that was developed during the Basel II conference by the Basel Committee on Banking Supervision. The ratio has evolved out of the Cooke ratio, which was originally developed during Basel I in 1998. Improvements were made to update the ratio because the development of new financial instruments were creating problems for determining the risk carried by banks.
Investopedia Says

Investopedia explains 'McDonough Ratio'

The McDonough ratio was named after William McDonough, the head of the Basil Committee. Although the McDonough ratio sets its benchmark at the same percent value as the Cooke ratio, the overall calculation has been improved. The major difference comes in the calculation of a bank's risk-weighted assets. The Cooke ratio did not give different weights to borrowers of differing quality. This was changed under the McDonough ratio, which used the probability of default and the expected loss from default to assign varying weights to assets in the denominator.

Articles Of Interest

  1.

    What Are Central Banks?

    They print money, they control inflation, and much, much more. All you need to know about central banks is here.

  2. An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.

  3. What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.

  4. Arbitrage Squeezes Profit From Market Inefficiency

    This influential strategy capitalizes on the relationship between price and liquidity.

  5. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  6. Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.

  7. R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.

  8. Mitigating Downside With The Sortino Ratio

    Differentiate between good and bad volatility with the Sortino Ratio.

  9. Quantitative Analysis Of Hedge Funds

    Hedge fund analysis requires more than just the metrics used to analyze mutual funds.

  10. Rule Of 72

    Learn more about this quick approximation that can determine roughly the number of years it'll take your money to double.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center