Expected shortfall
NMRF framework: does it satisfy the ‘use test’?
Non-modellable risk factors affect risk sensitivity and face practical and calibration difficulties, argue two risk experts
The consequences of the Basel III requirements for the liquidity horizon and their implications for optimal trading strategy
Forecasting extreme tail risk in China’s banking sector: an approach based on a component generalized autoregressive conditional heteroscedasticity and mixed data sampling model and extreme value theory
Hierarchical allocation method for capital: a general method
European regulator praises Japan’s ‘smart’ NMRF manoeuvre
Comments come after revelation that Nomura is able to reverse NMRF status for risk factors
Nomura’s ES requirement swings 75% in turbulent debut
New gauge for modelling interest rate desks’ charges ranged from ¥23bn to ¥41bn over the course of Q1
How to solve the Fed’s $300bn FRTB problem
A sacrifice will have to be made to ensure new market risk rules meet demands for capital neutrality
Nomura’s FRTB models reap 33% saving on debut
Trading desks cleared for new IMA’s use win ¥225 billion relief on end-March capital requirements
Semiparametric GARCH models for value-at-risk and expected shortfall: an object-driven procedure
Basing their approach in object-drive smoothing, the authors calculate value-at-risk and expected shortfall via an application of semi-GARCH models.
The VAR-centric models that never were
Often spotlighted, rarely dominant – VAR plays a surprisingly small role in most IMA stacks
Tug of law: EC’s FRTB compromise plan can’t please everyone
Leaked draft consultation unlikely to reconcile the global versus regional bank divide
During Trump turbulence, value-at-risk may go pop
Trading risk models have been trained in quiet markets, and volatility is now looming
Study finds just 10 banks plan to apply for FRTB models
Research provides extra insight on reasons for decline in internal models
Model teams fear budget cuts as FRTB wipeout looms
Senior modellers think supervisory intervention is needed to prevent funding drought
Loss of diversification benefits ‘will drive higher FRTB charges’
Independent study backs industry’s claims of significant rise in market risk capital requirements
A study of China’s financial market risks in the context of Covid-19, based on a rolling generalized autoregressive score model using the asymmetric Laplace distribution
The authors construct a risk measurement model for the financial market during the Covid-19 pandemic, using data from the Shanghai Stock Exchange for empirical analysis.
Why Canada is giving FRTB internal models the cold shoulder
“Crazy” cost of tech upgrades among reasons why banks snub own models to calculate market risk capital
Digging deeper into deep hedging
Dynamic techniques and GenAI simulated data can push the limits of deep hedging even further, as derivatives guru John Hull and colleagues explain
FRTB managers face hard facts about risk factors
There are ways to reduce the capital charges caused by NMRFs, but they come at a price
Party’s over as more banks drop internal models for market risk
At least three systemic banks in Europe intend to ditch IMA for capital requirements
Realized quantity extended conditional autoregressive value-at-risk models
The author presents models for improved Value-at-Risk forecasts and joint forecasts of Value at Risk and Expected Shortfall and demonstrates that high-frequency-data-based realized quantities lead to better forecasts.
Filling the gaps in Basel’s interest rate risk measures
Reverse stress-testing or VAR may work better than existing outlier tests, but are hard to manage
As banks limit FRTB model use, outputs get more volatile
Risk managers say selection of stress window becomes more sensitive if fewer desks are on IMA
EU banks balk at new market risk models back test
EBA proposals introduce additional expected shortfall back test for market capital risk models under FRTB