Economic capital allocation under liquidity constraints

摘要

Since the capital structure affects the performance of financial institutions confronted to liquidity constraints, the Economic Capital is determined by the maximisation of value.Allowing economic decisions to be characterised by a distorted probability distribution, so assessing the attitude towards risk as well as information and knowledge, the optimal surplus is expressed as a Value-at-Risk, as recommended by the BaselCommittee. Thus, demanding more capital than regulatory requirements accounts fordifferent expectations about risks. The optimal surplus is allocated to the lines ofbusiness of a conglomerate according to the borne risk and the type of divisionalmanagers. Full-allocation is assured and no covariances are required. Further, amechanism is provided, which allows for the distribution of equity in a decentralisedorganisation.