Definition of economic capital

Economic capital is the amount of risk capital held by a financial services company to enable it to survive any difficulties such as market or credit risks.

The amount is determined internally by the company or by shareholders, often using a measure of portfolio risk such as Var, i.e., value at risk.

Var describes the probability of losing more than a given amount of assets, based on a current portfolio.  [1]

FT Articles & Analysis

No articles are associated with this term