Optimal Numeraires for Risk Measures
4 Pages Posted: 14 Mar 2007
Date Written: December 21, 2006
Can the usage of a risky numeraire with a greater than risk free expected return reduce the capital requirements in a solvency test? I will show that this is not the case. In fact, under a reasonable technical condition, there exists no optimal numeraire which yields smaller capital requirements than any other numeraire.
Keywords: Change of Numeraire, Solvency Capital Requirements
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