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Solvency Capital estimation and Risk Measures


  • Antoni Ferri

    () (Departament d'Econometria, Estadística i Economia Espanyola. RISC-IREA. University of Barcelona. Spain)

  • Montserrat Guillén

    () (Departament d'Econometria, Estadística i Economia Espanyola. RISC-IREA. University of Barcelona. Spain)

  • Lluís Bermúdez

    () (Departament de Matemàtica Financera i Actuarial. RISC-IREA. University of Barcelona. Spain)


This paper examines why a financial entity’s solvency capital estimation might be underestimated if the total amount required is obtained directly from a risk measurement. Using Monte Carlo simulation we show that, in some instances, a common risk measure such as Value-at-Risk is not subadditive when certain dependence structures are considered. Higher risk evaluations are obtained for independence between random variables than those obtained in the case of comonotonicity. The paper stresses, therefore, the relationship between dependence structures and capital estimation.

Suggested Citation

  • Antoni Ferri & Montserrat Guillén & Lluís Bermúdez, 2012. "Solvency Capital estimation and Risk Measures," Working Papers XREAP2012-02, Xarxa de Referència en Economia Aplicada (XREAP), revised Jan 2012.
  • Handle: RePEc:xrp:wpaper:xreap2012-02

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    References listed on IDEAS

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    2. Xavier Fageda & Jordi Perdiguero, 2014. "An Empirical Analysis of a Merger Between a Network and Low-cost Airlines," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 81-96, January.
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    5. Xosé-Luís Varela-Irimia, 2014. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990s," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(4), pages 419-455, November.
    6. Marta Arespa, 2011. "Macroeconomics of extensive margins: a simple model," Working Papers XREAP2011-19, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2011.
    7. Anna Matas & Josep Lluís Raymond, 2006. "Economic development and changes in car ownership patterns," Working Papers CREAP2006-01, Xarxa de Referència en Economia Aplicada (XREAP), revised Jun 2006.
    8. Marta Arespa, 2011. "A New Open Economy Macroeconomic Model with Endogenous Portfolio Diversifi cation and Firms Entry," Working Papers XREAP2011-15, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2011.
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    Cited by:

    1. Lluís Bermúdez & Antoni Ferri & Montserrat Guillén, 2014. "On the use of risk measures in solvency capital estimation," International Journal of Business Continuity and Risk Management, Inderscience Enterprises Ltd, vol. 5(1), pages 4-13.


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