In this paper we propose a new rule to allocate risk capital to portfolios or divisions within a firm. Specifically, we determine the capital allocation that minimizes the excesses of sets of portfolios in a lexicographical sense. The excess of a set of portfolios is defined as the expected loss of that set of portfolios in excess of the amount of risk capital allocated to them. The underlying ...

Capital allocation principles are used in various contexts in which a risk capital or a cost of an aggregate position has to be allocated among its constituent parts. We study capital allocation principles in a performance measurement framework. We introduce the notation of suitability of allocations for performance measurement and show under different assumptions on the involved risk measures ...

This paper studies capital allocation problem based on minimizing loss functions. Two capital allocation models based on the Mean-Variance principle are proposed. General formulas for optimal capital allocations for both models are derived according to quadratic distance measure. In particular, we discuss centrally symmetric distributions and gamma distributions. Some numerical examples are giv...

This paper proposes three models of social capital and growth that incorporate different perspectives on the concept of social capital and the empirical evidence gathered to date. In these models, social capital impacts growth by assisting in the accumulation of human capital, by affecting financial development through its effects on collective trust and social norms, and by facilitating networ...

In this section, we provide the proof of our main result, Proposition 1, for the general setup where the economy starts from any initial level of capital stock and prices change over time. In order to do so, we first define the parent’s problem under taxes in the general setup. Preparation to the proof. Let k0 be the initial level of capital stock and {kt }t be the sequence of the efficient cap...