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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | Diversification, protection of liability holders and regulatory arbitrage |
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| Institution | Cornell University |
| Series Name | ArXiv.org |
| Number | 1502.03252 |
| ISSN | 2331-8422 |
| Number of Pages | 18 |
| Date | 2015 |
| Abstract Text | Any solvency regime for financial institutions should be aligned with the two fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. From these objectives wederive two normative requirements for capital adequacy tests, called surplus and numeraire invariance, respectively. We characterize capital adequacy tests that satisfy surplus and numeraire invariance, establish anintimate link between these requirements, and highlight aninherent tension between the ability to meet them and the desire to give credit for diversification. |
| Free access at | Related URL |
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| Other Identification Number | merlin-id:12494 |
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