Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088766 | Journal of Banking & Finance | 2015 | 10 Pages |
Abstract
The theory of acceptance sets and their associated risk measures plays a key role in the design of capital adequacy tests. The objective of this paper is to investigate the class of surplus-invariant acceptance sets. We argue that surplus invariance is a reasonable requirement from a regulatory perspective, since the corresponding capital adequacy tests do not depend on the surplus of a financial institution, which benefits exclusively its shareholders, but only on the default profile, which affects its liability holders. We provide a detailed analysis of surplus-invariant acceptance sets and their associated risk measures and we discuss the link with loss-based and excess-invariant risk measures, recently studied by Cont et al. (2013) and by Staum (2013), respectively.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Pablo Koch-Medina, Santiago Moreno-Bromberg, Cosimo Munari,