Diversification, protection of liability holders and regulatory arbitrage

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• 作者：Pablo Koch-Medina ; Cosimo Munari ; Mario Šikić
• 关键词：Capital adequacy ; Solvency regulation ; Surplus invariance ; Numéraire invariance ; Diversification
• 刊名：Mathematics and Financial Economics
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：11
• 期：1
• 页码：63-83
• 全文大小：
• 刊物类别：Mathematics and Statistics
• 刊物主题：Quantitative Finance; Finance, general; Macroeconomics/Monetary Economics//Financial Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Applications of Mathematics; Statistics for
• 出版者：Springer Berlin Heidelberg
• ISSN：1862-9660
• 卷排序：11

文摘

Any solvency regime for financial institutions should be aligned with the fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. The first objective leads to consider surplus-invariant capital adequacy tests, i.e. tests that do not depend on the surplus of a financial institution. We provide a complete characterization of closed, convex, surplus-invariant capital adequacy tests that highlights an inherent tension between surplus-invariance and the desire to give credit for diversification. The second objective leads to requiring consistency of capital adequacy tests across jurisdictions. Of particular importance in this respect are capital adequacy tests that remain invariant under a change of numéraire. We establish an intimate link between surplus- and numéraire invariant tests.