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Criterias for an effective risk based capital method
 Same for all classes of insd, types of insr, types of claimant
 Objectively measured; based on financial data and mathematical formula
 Discriminate btwn quantifiable measures of risk

Expected PH Deficit
 EPD = D_{L} = ∑_{X>A}(X  A)p(x)
 EPD = D_{L} = ∫(X  A)p(x)dx
 EPD ratio = d_{L} = D_{L}/E(loss) = D_{L}/L

EPD under Normal distribution
 c = ratio of capital to exp loss (A = (1 + c)L)
 c_{A} = C/A
 k = coefficient of variation for liabilities
 k_{A} = coefficient of variation for assets
 d_{L} = D_{L}/L = kφ(c/k)  cΦ(c/k)
 d_{A} = D_{A}/L = 1/(1  c_{A})[k_{A}φ(c_{A}/k_{A})  c_{A}Φ(c_{A}/k_{A})]

EPD under Lognormal distribution
 d_{L} = Φ(a)  (1  c)Φ(a  k)
 d_{A} = Φ(b)  Φ(b  k_{A})/(1  c_{A})
 where a = k/2  ln(1 + c)/k
 and b = k_{A}/2 + ln(1  c_{A})/k_{A}

