Amount of money needed to secure survival in a worst-case scenario
Not to be confused with Financial capital, Financial centre, or Capital (economics).
In finance, mainly for financial services firms, economic capital (ecap) is the amount of risk capital, assessed on a realistic basis, which a firm requires to cover the risks that it is running or collecting as a going concern, such as market risk, credit risk, legal risk, and operational risk. It is the amount of money that is needed to secure survival in a worst-case scenario. Firms and financial services regulators should then aim to hold risk capital of an amount equal at least to economic capital.
Typically, economic capital is calculated by determining the amount of capital that the firm needs to ensure that its realistic balance sheet stays solvent over a certain time period with a pre-specified probability. Therefore, economic capital is often calculated as value at risk. The balance sheet, in this case, would be prepared showing market value (rather than book value) of assets and liabilities.
The first accounts of economic capital date back to the ancient Phoenicians, who took rudimentary tallies of frequency and severity of illnesses among rural farmers to gain an intuition of expected losses in productivity. These calculations were advanced by correlations to climate change, political outbreaks, and birth rate change.[citation needed]
The concept of economic capital differs from regulatory capital in the sense that regulatory capital is the mandatory capital the regulators require to be maintained while economic capital is the best estimate of required capital that financial institutions use internally to manage their own risk and to allocate the cost of maintaining regulatory capital among different units within the organization.
In finance, mainly for financial services firms, economiccapital (ecap) is the amount of risk capital, assessed on a realistic basis, which a firm requires...
as capital of Sindh was ceased due to the One Unit programme enacted by President Iskander Mirza. Karachi of the 1960s was regarded as an economic role...
Financial capital (also simply known as capital or equity in finance, accounting and economics) is any economic resource measured in terms of money used...
economy Economiccapital Financial capital, an economic resource measured in terms of money Capital good Human capital Natural capital Public capital Social...
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Walloon Brabant, in total home to over 5 million people. As Belgium's economiccapital and a top financial centre in Western Europe with Euronext Brussels...
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset...
less the capital charge ($) for raising the firm's capital. The idea is that value is created when the return on the firm's economiccapital employed...
contrast to cultural, economic, administrative capital, physical capital, political capital, social capital and symbolic capital. Sociologists James Coleman...
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types of capital. These types were economiccapital, in the form assets convertible to money and secured as private property. This type of capital is separated...
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education. Human capital has a substantial impact on individual earnings. Research indicates that human capital investments have high economic returns throughout...
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environmental resources should be treated as important economic assets, called natural capital. Economic development has traditionally required a growth in...
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Civil War to the Chinese Communist Party (CCP) and set up a provisional capital in Taipei. The CCP established the People's Republic. As such, the political...
aggregated. As a consequence, economiccapital for a conglomerate is usually substantially less than economiccapital is for the sum of its parts. Debt...
exposures—and on calculating and monitoring the resultant economiccapital, and regulatory capital under Basel III. The calculations here are mathematically...
concepts as cultural, social, and symbolic forms of capital (as opposed to traditional economic forms of capital), the cultural reproduction, the habitus, the...
general term of globalization. Economic globalization refers to the widespread international movement of goods, capital, services, technology and information...
and South Africa during the 1980s. Gaborone is the economiccapital as well as the government capital; it is headquarters to numerous companies and the...
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