The VAR at risk

Alfred Galichon

doi:10.1142/S0219024910005875

The VAR at risk

Alfred Galichon

Research output: Contribution to journal › Article › peer-review

Abstract

I show that the structure of the firm is not neutral with 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.

Original language	English (US)
Pages (from-to)	503-506
Number of pages	4
Journal	International Journal of Theoretical and Applied Finance
Volume	13
Issue number	4
DOIs	https://doi.org/10.1142/S0219024910005875
State	Published - Jun 2010

Keywords

Value-at-risk

ASJC Scopus subject areas

General Economics, Econometrics and Finance
Finance

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The VAR at risk

Abstract

Keywords

ASJC Scopus subject areas

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