TL;DR
This paper examines how a firm's internal structure influences the regulatory capital requirements set by Value-at-Risk-based rules, highlighting the importance of structural considerations in risk regulation.
Contribution
It introduces a framework showing that firm structure significantly impacts capital requirements under VaR-based regulations, a factor often overlooked in prior models.
Findings
Firm structure affects VaR-based capital calculations.
Regulatory capital requirements are sensitive to internal firm organization.
Implications for designing fair and effective risk regulation.
Abstract
I show that the structure of the firm is not neutral in respect to regulatory capital budgeted under rules which are based on the Value-at-Risk.
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