Total economic capital modeling based on Copula function

摘要

In this paper we present a new approach to calculate the total economic capital required to protect a financial institution against possible losses. The approach takes into account credit, operational and market risk types and their correlation. It applies Copula to aggregate the total risk and in this respect improves upon the conventional practice that assumes perfectly correlated risks. A more rational way of thinking for economic capital calculation in financial institutions was then provided.