Damir Filipovic (Department of Mathematics, University of Munich) Michael Kupper
Abstract
In this paper we elaborate on Swiss Solvency Test (SST) consistent group diversification effects via optimizing the web of capital and risk transfer (CRT) instruments between the legal entities. A group level SST principle states that subsidiaries can be sold by the parent company at their economic value minus some minimum capital requirement. In a numerical example we examine the dependence of the optimal CRT on this minimum capital requirement. Our findings raise the question of how to actually implement this group level SST principle and how to define the respective level of minimum capital requirements, in particular.
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Publisher Info
Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number
188.
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