The Var at Risk
Résumé
I show that the structure of the firm is not neutral with respect to regulatory capitalbudgeted under rules which are based on the Value-at-Risk. Indeed, when a holdingcompany has the liberty to divide its risk into as many subsidiaries as needed, andwhen the subsidiaries are subject to capital requirements according to the Value-at-Riskbudgeting rule, then there is an optimal way to divide risk which is such that the totalamount of capital to be budgeted by the shareholder is zero. This result may lead toregulatory arbitrage by some firms.