Buch, Arne and Dorfleitner, Gregor and Wimmer, Maximilian (2011) Risk capital allocation for RORAC optimization. JOURNAL OF BANKING & FINANCE, 35 (11). pp. 3001-3009. ISSN 0378-4266,
Full text not available from this repository. (Request a copy)Abstract
This paper considers the financial optimization problem of a firm with several sub-businesses striving for its optimal RORAC. An insightful example shows that the implementation of classical gradient capital allocation can be suboptimal if division managers are allowed to venture into all business whose marginal RORAC exceeds the firm's RORAC. The marginal RORAC requirements are refined by adding a risk correction term that takes into account the interdependencies of the risks of different lines of business. It is shown that under certain stationarity conditions this approach can guarantee that the optimal RORAC will eventually be achieved. (C) 2011 Elsevier B.V. All rights reserved.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | INSURANCE COMPANIES; REQUIREMENTS; PRINCIPLE; Risk capital; Economic capital; Capital allocation; Gradient allocation; Euler allocation; RORAC |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzierung (Prof. Dr. Gregor Dorfleitner) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 28 May 2020 13:39 |
| Last Modified: | 28 May 2020 13:39 |
| URI: | https://pred.uni-regensburg.de/id/eprint/19935 |
Actions (login required)
 |
View Item |
