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Journal Articles International Journal of Theoretical and Applied Finance Year : 2010

The Var at Risk

Alfred Galichon


I show that the structure of the firm is not neutral with respect to regulatory capital budgeted under rules which are based on the Value-at-Risk. Indeed, when a holding company has the liberty to divide its risk into as many subsidiaries as needed, and when the subsidiaries are subject to capital requirements according to the Value-at-Risk budgeting rule, then there is an optimal way to divide risk which is such that the total amount of capital to be budgeted by the shareholder is zero. This result may lead to regulatory arbitrage by some firms.
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hal-03588292 , version 1 (24-02-2022)



Alfred Galichon. The Var at Risk. International Journal of Theoretical and Applied Finance, 2010, 13 (4), pp.503 - 506. ⟨hal-03588292⟩
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