On the Group Level Swiss Solvency Test

Damir Filipovic and Michael Kupper
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Damir Filipovic: Department of Mathematics, University of Munich

No 188, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: In this paper we elaborate on Swiss Solvency Test (SST) consistent group diversification effects via optimizing the web of capital and risk transfer (CRT) instruments between the legal entities. A group level SST principle states that subsidiaries can be sold by the parent company at their economic value minus some minimum capital requirement. In a numerical example we examine the dependence of the optimal CRT on this minimum capital requirement. Our findings raise the question of how to actually implement this group level SST principle and how to define the respective level of minimum capital requirements, in particular.

Keywords: convex optimization; group diversification; minimum capital requirement; Swiss solvency test (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-01-01
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (8)

Published as: Filipovic, D. and Kupper, M., 2007, "On the Group Level Swiss Solvency Test", Bulletin of the Swiss Association of Actuaries, 1, 97-115.

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