On the use of risk measures in solvency capital estimation
by Lluís Bermúdez; Antoni Ferri; Montserrat Guillén
International Journal of Business Continuity and Risk Management (IJBCRM), Vol. 5, No. 1, 2014

Abstract: Regulation on the minimum capital that a financial institution or an insurance firm must hold to guarantee its solvency is proportional to a measure of its global risk. Using Monte Carlo simulation we show that, in some instances, risk measures can substantially underestimate risk. So, we address the implications on the choice of the risk measure that determines the economic capital requirement. The paper analyses the relationship between dependence structures, risk measurement and capital estimation.

Online publication date: Sat, 31-May-2014

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