Capital calculation methods
Capital calculation methods
Capital calculation methods
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How to use this<br />
• Directly – implementation of internal models for Solvency II<br />
• Validation that the correlation matrix aggregation methodology does not introduce too much<br />
error<br />
• Can be considered part of validation/ORSA<br />
• Relevant for companies using the standard formula but also companies having an internal model<br />
which uses the correlation matrix aggregation method<br />
• What is needed<br />
• Construct risk factor distributions as in the standard formula calibrations – including dependency – based on<br />
calibration reports from EIOPA<br />
• Process<br />
• Run a set of stresses (quite a few)<br />
• Fit the loss functions and calculate the capital using curve fitting<br />
• Compare it to results (standard formula or correlation matrix method internal model) and assess error<br />
23 <strong>Capital</strong> <strong>calculation</strong> <strong>methods</strong><br />
© 2012 Deloitte Česká republika
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