# Solvency

`kaal:entity:solvency`

**Status.** derived

This node is assembled mechanically from the 3 claims that carry the concept tag `solvency`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

3 claims across 2 works, 2012 to 2019.

**2012**

- [2097160-032](https://wulfkaal.github.io/claims/2097160-032) [failure/argued] *(failure mode)* -- The governance benefits of traditional inside debt, incentive optimization and reduced agency costs, all depend on the entity remaining solvent, and inside debt supplies no mechanism of its own to ensure that solvency.
  > value and the associated governance benefits215 incentive optimization216 and reduction of agency costs217 depend on the solvency of the respective entity. Inside debt without a conversion feature provides no mechanism to ensure the solvency of the entity.
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

**2019**

- [3396542-020](https://wulfkaal.github.io/claims/3396542-020) [definitional/argued] -- The margin m is stipulated as the premium per dollar in excess of the probability of a claim occurring at some point in the policy's life, and this margin is the quantity that must exceed a derived threshold for the design to hold.
  > Thus, m is the amount of premium per dollar in excess of the probability of a claim on the policy sometime during its life.
  Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542
- [3396542-021](https://wulfkaal.github.io/claims/3396542-021) [condition/argued] *(failure mode)* -- The DAO is insolvent when the present value of expected cash flows from new policies falls below the expected cash outflow on currently outstanding policies, and in that state the value of a token is negative.
  > The DAO will be insolvent if the value of the DAO becomes negative - in other words, if the Present Value (PV) of expected cash flows from new policies is less than the expected cash outflow from currently outstanding (old) policies. If the DAO is insolvent, the value of a token will be negative.
  Craig Calcaterra, Wulf A. Kaal, Vadhindran K. Rao, Decentralized Underwriting (2019). SSRN: https://ssrn.com/abstract=3396542

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/solvency.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.