De Waegenaere, Anja; Norde, Henk; van Gulick, G. - Tilburg University, Center for Economic Research - 2010
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 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 …