EBA relaxes modellability hurdles for market risk capital
Flexibility granted for assessing NMRFs on options, but constraints remain on committed quotes
The European Banking Authority has dialled back hurdles in a test for determining whether risks are hard-to-model under forthcoming trading book capital rules, but a restriction remains on the way quotes from the market are used in the test.
Derivatives traders are particularly relieved by a change to the way complex risks used to price volatility in options and swaptions will be capitalised, as two previously proposed approaches were found to be impractical.
“It seems the EBA understood our
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