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 "identifier": "kaal:entity:capital-requirements",
 "name": "Capital requirements",
 "termCode": "capital-requirements",
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 "author": {
  "@type": "Person",
  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
 },
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1806252-003",
   "identifier": "kaal:claim:1806252-003",
   "text": "Building on the increase in capital requirements for counterparty risk already suggested in Basel III, Basel III could add a charge on banks' assets based on their lending exposure to hedge funds.",
   "abstract": "Basel III could also include a charge for banks' assets based on their lending exposure to hedge funds.",
   "citation": "Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252",
   "datePublished": "2011",
   "claim_type": "design",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "Basel Committee adopts the proposal"
   ],
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   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1908473-017",
   "identifier": "kaal:claim:1908473-017",
   "text": "Contingent capital securities are likely to be more efficient than raising capital requirements, because the capital arrives only when it is needed.",
   "abstract": "CCS will likely be more efficient than raising capital requirements because the capital arrives only when it is needed.",
   "citation": "Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473",
   "datePublished": "2011",
   "claim_type": "mechanism",
   "confidence": "asserted",
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1998455-009",
   "identifier": "kaal:claim:1998455-009",
   "text": "Installing contingent capital can be more efficient than raising capital requirements, because the capital injection becomes available only when it is needed and only enough securities convert to recapitalize the firm.",
   "abstract": "Installing contingent capital could be more efficient than raising capital requirements because the capital injection is available only when it is needed.",
   "citation": "Wulf A. Kaal, Initial Reflections on the Possible Application of Contingent Capital in Corporate Governance (2012). SSRN: https://ssrn.com/abstract=1998455",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "assumes a functioning trigger that fires at the right time",
    "assumes incremental or calibrated conversion"
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2957645-020",
   "identifier": "kaal:claim:2957645-020",
   "text": "Contingent capital may be more efficient than simply raising capital requirements, because the capital injection is available only when it is needed and, when triggered, only as much of the contingent capital converts as is necessary to recapitalize the firm.",
   "abstract": "Further, contingent capital may be more efficient than raising capital requirements, because the capital injection is available only when it is needed45 and, when triggered, only enough CCS converts as is necessary to recapitalize the firm.46",
   "citation": "Kaal, Dynamic Regulation via Contingent Capital (2017). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957645",
   "datePublished": "2017",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "the trigger design causes conversion only in the amount necessary for recapitalization"
   ],
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2957645-024",
   "identifier": "kaal:claim:2957645-024",
   "text": "Contingent capital could create a regime for providing countercyclical regulatory capital that further enhances the regulatory capital requirements of the Federal Reserve and those under Basel III.",
   "abstract": "Accordingly, contingent capital could create a regime for providing countercyclical regulatory capital51 that further enhances regulatory capital requirements of the Federal Reserve52 and under Basel III.53",
   "citation": "Kaal, Dynamic Regulation via Contingent Capital (2017). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957645",
   "datePublished": "2017",
   "claim_type": "design",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "contingent capital is used alongside, not instead of, existing minimum capital requirements"
   ],
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396522-008",
   "identifier": "kaal:claim:3396522-008",
   "text": "Both collateralization strategies carry significant downsides: fiat collateralized pegs bear the brunt of expensive capital requirements, while cryptocurrency pegs face heavy volatility pressures and swings.",
   "abstract": "Collateralized fiat currency pegs bear the brunt of expensive capital requirements and uncollateralized cryptocurrency pegs face heavy volatility pressures and swings.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Stable Cryptocurrencies (2019). SSRN: https://ssrn.com/abstract=3396522",
   "datePublished": "2019",
   "claim_type": "failure",
   "confidence": "argued",
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396542-024",
   "identifier": "kaal:claim:3396542-024",
   "text": "In the DAO structure, provided an adequate token encumbrance system is in place, each agent is individually responsible for the payouts on the policies that agent underwrote, so the burden of holding adequate capital shifts from the entity to each individual agent.",
   "abstract": "each agent is responsible for meeting the payouts on the policies they have underwritten. Consequently, the burden of maintaining adequate capital falls on each individual agent",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542",
   "datePublished": "2019",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "a good system ensures adequate tokens are encumbered per policy"
   ],
   "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396542-025",
   "identifier": "kaal:claim:3396542-025",
   "text": "Aggregate capital under the DAO structure is lower than under a traditional corporate insurer only if the incremental risk that contingent underwriting liabilities add to agents' private portfolios is small enough; the reduction is conditional, not automatic.",
   "abstract": "Thus, to reiterate the main point, if the incremental risk to the private portfolios of the agents from the contingent liabilities is small enough, the sum of the individual amounts of capital the DAO agents will hold will be less than the capital requirement for a traditional corporate entity.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542",
   "datePublished": "2019",
   "claim_type": "condition",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "all policies and agents identical",
    "agent payouts independent and identically distributed and uncorrelated with private portfolios"
   ],
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   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396542-026",
   "identifier": "kaal:claim:3396542-026",
   "text": "The burden of maintaining sufficient liquidity to meet claims does not rest on the DAO but on the individual underwriters that make it up.",
   "abstract": "We note that the burden of maintaining sufficient liquidity in order to meet claims is not on the DAO, but rather on the individual underwriters that make up the DAO.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542",
   "datePublished": "2019",
   "claim_type": "mechanism",
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   "scope_conditions": [],
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396542-027",
   "identifier": "kaal:claim:3396542-027",
   "text": "Because each underwriter sizes capital against the risk of that underwriter's overall portfolio, and underwriting can be diversifying for a non traditional participant, the sum of the underwriters' incremental Values at Risk may be less than the Value at Risk of a single insurance firm writing the same contracts.",
   "abstract": "As a result, the sum of the incremental VaRs (Value at Risk amounts) of the individual underwriters may be less than the VaR of an insurance firm that has underwritten the same contracts.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542",
   "datePublished": "2019",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "underwriter capital set by overall portfolio risk",
    "especially for non traditional underwriters"
   ],
   "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3396542-028",
   "identifier": "kaal:claim:3396542-028",
   "text": "How much capital an underwriter holds is ultimately a matter of personal risk preference, and an underwriter willing to tolerate fluctuations in token holdings need provide only for expected losses.",
   "abstract": "More importantly, how much capital an underwriter holds is a matter of their personal risk preference. An underwriter who is willing to tolerate fluctuations in their token holdings need only provide for expected losses.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542",
   "datePublished": "2019",
   "claim_type": "mechanism",
   "confidence": "asserted",
   "is_failure_mode": false,
   "scope_conditions": [
    "underwriter tolerant of fluctuations in token holdings"
   ],
   "source_pdf_sha256": "ce2bda03a0b788ea3e7747f02c3c351ef7c808a41150d5cda34767bbe98800c0",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3782216-018",
   "identifier": "kaal:claim:3782216-018",
   "text": "From the viewpoint of consumers and regulators, encumbered reputation tokens serve as a substitute for capital, because they derive their value from the DAO's future cash flows.",
   "abstract": "The key point is this: from the viewpoint of consumers and regulators, the encumbered tokens (which as we know derive their value from the DAO's future cash flows) essentially serve as a substitute for capital.",
   "citation": "Craig Calcaterra, Wulf A. Kaal, Decentralized Finance (DeFi) (2021). SSRN: https://ssrn.com/abstract=3782216",
   "datePublished": "2021",
   "claim_type": "design",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "Underwriting DAO whose tokens are claims on future cash flows"
   ],
   "source_pdf_sha256": "f1739743aa06bbc1641cd65da790d531b69d8628ea3f5cc3fcad1bf5a1242373",
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3949098-004",
   "identifier": "kaal:claim:3949098-004",
   "text": "Kaal stipulates the core proposition of reputation as capital: once meaningful decentralized reputation is established, reputation can be used to remove the need for a capital base and for capital requirements.",
   "abstract": "In essence, once meaningful decentralized reputation is established, reputation can be used to remove the need for capital base and/or capital requirements.",
   "citation": "Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098",
   "datePublished": "2021",
   "claim_type": "definitional",
   "confidence": "asserted",
   "is_failure_mode": false,
   "scope_conditions": [
    "meaningful decentralized reputation has been established"
   ],
   "source_pdf_sha256": "04297905564a6092b2db7640561f58fd374d3114c79527357bad09d11b909819",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3962614-043",
   "identifier": "kaal:claim:3962614-043",
   "text": "Reputation as capital has the potential to lower capital requirements for VC businesses significantly and to increase liquidity at unprecedented levels, because VCs can sell their fungible reputation tokens to the market as needed.",
   "abstract": "Reputation as capital has the potential to lower capital requirements for VC businesses significantly and increase liquidity at unprecedented levels because VCs fungible reputation tokens can be sold to the market as needed by.",
   "citation": "Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614",
   "datePublished": "2021",
   "claim_type": "predictive",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "a functioning market for fungible reputation tokens"
   ],
   "source_pdf_sha256": "c6e202e77fd08db801f932774026458b94e5d103abf30cb1189fe6a1c5edf391",
   "status": "current"
  }
 ],
 "description": "14 claims in the published works of Wulf A. Kaal carry the concept tag 'capital-requirements'. Derived node: a roster, not an adjudicated definition."
}