Which of the Following Statements Regarding Economic Capital Is Correct

question 327

Multiple Choice

Which of the following statements regarding economic capital is correct?

• A) Economic capital is calculated externally and is the amount of capital the firm should have to support its target credit rating
• B) Economic capital is calculated on an expected shortfall basis with a specific time horizon and confidence level.
• C) Economic capital is used for measuring and reporting risks across a financial organisation.
• D) Economic capital is always lower than regulatory capital because of the more adequate modelling of correlation effects compared to the regulatory approach.

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