Banks are lashing out at plans to limit the extent to which portfolio diversification can cut capital requirements, arguing it will also remove incentives to hedge. One study shows the restriction could cause risk measures to rise by 133% for some hedged positions.
"By not allowing full diversification there is a complete disincentive to hedge certain exposures. This will be even more extreme for emerging markets where it is more common to hedge exposures across asset classes," says Marc van Bal
The week on Risk.net, December 9–15 2017Receive this by email