[20220415 : Colloquium]

Allocation of risk capital: proportional allocations revisited

1. 일시 2022년 4월 15일 (금) 15:30-16:30

2. 장소 Zoom을 이용한 실시간 온라인 강연

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3. 연사 : 계이섭 박사 (UCLA)

4. 제목 : Allocation of risk capital: proportional allocations revisited

5. 초록 : In the current reality of prudent risk management, the problem of determining aggregate risk capital in financial entities has been intensively studied. As a result, canonical methods have been developed and even embedded in regulatory accords. Though applauded by some and questioned by others, these methods provide a much desired standard benchmark for everyone. The situation is very different when the aggregate risk capital needs to be allocated to the business units (BUs) of a financial entity. That is, there are overwhelmingly many ways to conduct the allocation exercise, and there is arguably no standard method to do so on the horizon.

Irrespective of the choice of approaches is assumed, it is the proportional contribution of the riskiness of a stand-alone BU to the aggregate riskiness of the financial entity that is of central importance, and it is routinely computed nowadays as the quotient of the allocated risk capital due to the BU of interest and the aggregate risk capital due to the financial entity. For instance, in the simplest case when the mathematical expectation plays the role of the risk measure that generates the allocation rule, the desired proportional contribution is just a quotient of two means. Clearly, in general, this quotient of means does not concur with the mean of the quotient random variable that captures the genuine stochastic proportional contribution of the riskiness of the BU of interest. Inspired by this observation, herein we reenvision the way in which the allocation problem is tackled in the state of the art.

문의 : 허야용 교수님(yaryong@korea.ac.kr)