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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Definitions:

Bonuses

Additional financial compensation awarded to employees or individuals beyond their normal earnings.

Cost Centers

Departments or segments within an organization that do not directly generate revenue but incur costs, such as human resources or research and development.

Profits

The financial gain made in a transaction or business operation after accounting for all expenses.

Sales Training

A program or series of educational activities designed to enhance the skills and knowledge of sales personnel.