Identification and capitalisation of non-modellable risk factors

Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation

Under Basel’s new trading book rules, risk factors that cannot be evidenced by a sufficient set of real prices from representative transactions have to be considered non-modellable, and are subject to conservative capital requirements. Here, Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate