How can capital be allocated according to the NVMIR model?

The NVMIR model, or the Nonlinear Valuation with Market Impact and Risk, is focused on optimizing the allocation of capital while taking into account various risk factors and market impacts. In this framework, using var-based position limits is crucial because it allows an organization to manage its risk exposure effectively.

When capital is allocated with this model, implementing var-based position limits helps ensure that the potential loss in a portfolio does not exceed a predefined level, which aligns with the company's risk management strategy. This method helps prevent significant financial distress by limiting how much capital can be deployed in a specific position or investment, thereby promoting a more prudent and risk-aware approach to capital allocation.

The other options do not reflect the capital allocation principles under the NVMIR model. Maximizing market share or nominating key shareholders do not inherently connect to risk management practices. Holding minimum liquidity ratios is important for liquidity management but does not specifically focus on the allocation of capital per the NVMIR principles. Therefore, using var-based position limits is the method that accurately aligns with the goals and tenets of the NVMIR model for capital allocation.