Trading book proposals published by Basel Committee
Yesterday, the Basel Committee on Banking Supervision issued a paper outlining proposed capital requirements for banks’ exposures to certain trading-related activities—also known as the Trading Book Project. .
The new paper—which is in effect an addendum to the Basel II framework published last summer—includes a treatment for counterparty credit risk. The paper also contains a solution for double default effects, or the risk that both a borrower and guarantor default on the same obligation
The paper, "The application of Basel II to trading activities and the treatment of double default effects," was
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