Intragroup transfers, intragroup diversification and their risk assessment

TL;DR

This paper proposes a framework for assessing group solvency by modeling intragroup transfer constraints as random closed sets and analyzing solvency tests based on the existence of acceptable transfer selections.

Contribution

It introduces a novel framework using random closed sets to describe admissible intragroup transfers and evaluates solvency tests based on these models.

Findings

Framework for admissible transfers ranging from free movement to restrictions

Solvency tests based on the existence of acceptable transfer selections

Modeling transfer constraints as random closed sets

Abstract

When assessing group solvency, an important question is to what extent intragroup transfers may be considered, as this determines to which extent diversification can be achieved. We suggest a framework to describe the families of admissible transfers that range from the free movement of capital to excluding any transactions. The constraints on admissible transactions are described as random closed sets. The paper focuses on the corresponding solvency tests that amount to the existence of acceptable selections of the random sets of admissible transactions.