Hi, please respond to, agree, disagree, add your thoughts to this post in 5 sentences or more.
Economic capital in short is the amount of capital a company must have in order to take on additional risks. I work for a large wireless company who looks to purchase other companies for their services in order to grow our own portfolio of products. My company will evaluate their current capital to ensure that the risk we take with purchasing the company, will not effect our overall health and prevent our stock holders from continuing to do business with us. An example of this was when Verizon purchases AOL for 4.4 billion dollars. Verizon ensured their economic capital was in place to justify the risk of purchasing another company for such a large amount of money to help improve our over the top video streaming the consumers demand on an everyday basis.