Capital-neutral securitisation risk weights
A closed-form formula to allocate capital to the tranches of a securitisation is presented
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Frederic Zana and Eric Rossignol present a new calibration for the risk weights of securitisation instruments using the principle of capital neutrality. This aims to have the sum of the capital requirements on all the tranches of a securitisation transaction equal to the capital requirement of the relevant pool. They use the capital model of the regulator on the pool
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