EU banks grapple with NMRF proposals for volatility models

EBA options for lighter capital treatment of parametric curves could prove impractical

Volatility models

Plans by Europe’s banking regulator for capitalising complex risks in options trades have frustrated dealers, who complain the rules are punitive and hard to implement.

The proposals by the European Banking Authority, released on June 27 and open for consultation until October 4, spell out how banks would treat risk factors that are subject to differing capital charges under the incoming FRTB market risk regime.

The EBA has attempted to address concerns that Basel’s original standards were too

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