Use this identifier to quote or link this document: http://hdl.handle.net/2072/179582

Solvency Capital estimation and Risk Measures
Ferri Vidal, Antoni; Guillén, Montserrat; Bermúdez, Lluís
Xarxa de Referència en Economia Aplicada (XREAP)
This paper examines why a financial entity’s solvency capital estimation might be underestimated if the total amount required is obtained directly from a risk measurement. Using Monte Carlo simulation we show that, in some instances, a common risk measure such as Value-at-Risk is not subadditive when certain dependence structures are considered. Higher risk evaluations are obtained for independence between random variables than those obtained in the case of comonotonicity. The paper stresses, therefore, the relationship between dependence structures and capital estimation.
2012-01
Monte Carlo method
Financial institutions
Risk management
33 - Economia
336 - Finances. Banca. Moneda. Borsa
Mètode de Montecarlo
Institucions financeres
Gestió del risc
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26 p.
Working Paper
Xarxa de Referència en Economia Aplicada (XREAP)
XREAP2012-02;
         

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