Economic Capital
The economic capital represents for the services companies financial the amount of Stockholders' equity meeting the minimum need, evaluated on a realistic basis, to cover the risks which it manages or collects. Typically, this capital is calculated by determining the quantity of Stockholders' equity which the company needs to be assured that its Bilan will remain solvent, over certain a period time, with a preset rate of probability.
This concept is different from the regulatory capital; the economic capital is calculated starting from internal models and is in particular used for controlling and optimizing the output compared to the risk of an financial institution. The lawful capital governs equities minimum of the finance companies in order to avoid all systemic Risque.
See too
- obligatory Reserves
- Capital risk
- Financial risk
- Risk management
- Solvency
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