Conservative capital buffers may not be enough to protect against tail events
A review of the foreign exchange base currency approach under the standardized approach of the Fundamental Review of the Trading Book and issues related to the pegged reporting currency
When we adopt the parameters in the BCBS standards to calculate the delta risk charge, anomalies in the risk charges for the same risk exposure are found under different approaches and under different reporting currencies. The anomalies increase when the…
A derivative pricing approximation method using neural networks and AAD speeds up calculations
An internal default risk model: simulation of default times and recovery rates within the new Fundamental Review of the Trading Book framework
This paper presents a new default risk model for market risk that is consistent with these requirements. The recovery rates follow a waterfall model that is based on a minimum entropy principle.
Hany Farag argues that changing the base currency may address FRTB forex asymmetry
Acerbi and Szekely present a backtest for expected shortfall
Quants propose an allocation method for internal model capital charges
The implicit constraints of Fundamental Review of the Trading Book profit-and-loss-attribution testing and a possible alternative framework
This paper presents the constraints embedded in the the profit-and-loss-attribution test and explores a possible alternative framework.
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
A review of the fundamentals of the Fundamental Review of the Trading Book II: asymmetries, anomalies, and simple remedies
This paper highlights some anomalies and asymmetries in the new market risk paradigm of the Fundamental Review of the Trading Book (FRTB) framework.
This paper assesses the model risk associated with the copula choice for the calculation of the Default Risk Charge (DRC) measure.
The aim of this paper is to validate profit and loss attribution generated by daily movements of option prices as seen through their Black–Scholes (Black and Scholes 1973) and Merton (1973) implied volatilities.
In this paper, the authors analyze the failure probabilities of the profit-and-loss attribution (PLA) test as defined in the final market risk standard published in January 2016 by the Basel Committee on Banking Supervision.
Spinaci, Benigno, Fraquelli and Montoro propose two alternatives to the P&L attribution test
This paper presents a comprehensive model framework for DRC that is compliant with the revised Basel regulatory framework.
A review of the fundamentals of the Fundamental Review of the Trading Book: standard foreign exchange rules are highly asymmetric with respect to reporting currencies
This paper develops a framework to fully characterize the invariance of the Delta capital charge for the FX book under a change in reporting currency.
Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation
A new method to estimate marginal VAR and marginal ES is presented
Quants propose KVA and FVA accounting framework based on Solvency II regulation
Don’t say we didn’t warn you