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.
eng
Solvency II;
Solvency Capital Requirement;
Value‐at‐Risk;
Tail Value‐at‐Risk;
Monte Carlo;
Copulas;
Financial institutions;
Risk management;
Mètode de Montecarlo;
Institucions financeres;
Gestió del risc;
Xarxa de Referència en Economia Aplicada (XREAP)
2012