The VAR at risk

Alfred Galichon

    Research output: Contribution to journalArticlepeer-review


    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 languageEnglish (US)
    Pages (from-to)503-506
    Number of pages4
    JournalInternational Journal of Theoretical and Applied Finance
    Issue number4
    StatePublished - Jun 2010


    • Value-at-risk

    ASJC Scopus subject areas

    • General Economics, Econometrics and Finance
    • Finance


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