Stressed VAR will hit forex options, dealers warn

A wrecking ball breaking a white wall

Basel trading book capital rules are having a punitive impact on certain foreign exchange options and may push up the cost of more exotic trades – particularly in emerging market currencies, dealers say.

The root of the issue is the regulatory capital charge for stressed value-at-risk, introduced for many banks as part of the Basel 2.5 package of reforms at the beginning of the year.

“There should be a market impact from stressed VAR, and it will start filtering through as more and more people

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Stemming the tide of rising FX settlement risk

As the trading of emerging markets currencies gathers pace and broader uncertainty sweeps across financial markets, CLS is exploring alternative services designed to mitigate settlement risk for the FX market

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