Title :
Total economic capital modeling based on Copula function
Author :
Jinyu, Wang ; Qingli, Song
Author_Institution :
Sch. of Econ. & Manage., Shenyang Aerosp. Univ., Shenyang, China
Abstract :
In this paper we present a new approach to calculate the total economic capital required to protect a financial institution against possible losses. The approach takes into account credit, operational and market risk types and their correlation. It applies Copula to aggregate the total risk and in this respect improves upon the conventional practice that assumes perfectly correlated risks. A more rational way of thinking for economic capital calculation in financial institutions was then provided.
Keywords :
financial management; risk management; Copula function; credit risk; economic capital calculation; financial institution; market risk; operational risk; total economic capital modeling; Correlation; Distribution functions; Economics; Instruments; Joints; Random variables; Reactive power; correlation; credit risk; cumbel copula; market risk; operational risk; total risk;
Conference_Titel :
Service Systems and Service Management (ICSSSM), 2011 8th International Conference on
Conference_Location :
Tianjin
Print_ISBN :
978-1-61284-310-0
DOI :
10.1109/ICSSSM.2011.5959379