The VaR at Risk
Galichon, Alfred (2010), The VaR at Risk, International Journal of Theoretical and Applied Finance, 13, 4, p. 503-506. http://dx.doi.org/10.1142/S0219024910005875
TypeArticle accepté pour publication ou publié
Journal nameInternational Journal of Theoretical and Applied Finance
MetadataShow full item record
Abstract (EN)I show that the structure of the ﬁrm is not neutral in respect to regulatory capital budgeted under rules which are based on the Value-at-Risk. Indeed, when a holding company has the liberty to divide its risk into as many subsidiaries as needed, and when the subsidiaries are subject to capital requirements according to the Value-at-Risk budgeting rule, then there is an optimal way to divide risk which is such that the total amount of capital to be budgeted by the shareholder is zero. This result may lead to regulatory arbitrage by some firms.
Subjects / KeywordsValue-at-Risk
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