How to Allocate Capital if You Really Must
John Major and Stephen Mildenhall, CAS Spring Meeting, May 13, 2020
- Why allocate capital?
- Allocate cost of capital
- Tranching capital
- Fungible capital
- Distortion functions
- Scenario-loss domain
- Expected losses with limited liability
- Equal priority
- Expected loss by line with equal priority
- Natural allocation
- Two-line example
- Understanding conditional losses by line
- Why negative margins?