I did some search on "economic capital" over the internet, but for some reason, I just don't seem to be able to understand its meaning at all and I am feeling pretty frustrated. :(
More specifically, I have the following questions:
1) What does the term "capital" mean here?
I know that a company can typically raise capital by issuing debt or equity, so is Capital simply defined to be equal to Debt + Equity?
2) What exactly is "economic capital"? How is it defined/calculated? What does it mean?
If anyone can explain these, that would be great. Any help would be greatly appreciated! :)
More specifically, I have the following questions:
1) What does the term "capital" mean here?
I know that a company can typically raise capital by issuing debt or equity, so is Capital simply defined to be equal to Debt + Equity?
2) What exactly is "economic capital"? How is it defined/calculated? What does it mean?
If anyone can explain these, that would be great. Any help would be greatly appreciated! :)
Economic Capital
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