The FRTB’s P&L attribution-based eligibility test: an alternative proposal

Spinaci, Benigno, Fraquelli and Montoro propose two alternatives to the P&L attribution test

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The profit and loss (P&L) attribution test, a key part of being eligible to use internal models under Basel’s new market risk capital framework, is designed such that there is a high probability of internal models being erroneously rejected. Here, Marco Spinaci, Manuela Benigno, Andrea Fraquelli and Adolfo Montoro highlight the model risk embedded in the test and propose two alternatives

Several critiques have been advanced regarding the current profit-and-loss (P&L)

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