Please use this identifier to cite or link to this item:
http://hdl.handle.net/10071/31293
Author(s): | Carvalho, Paulo V. Pinheiro, C. Rodrigues, M. S. |
Date: | 2024 |
Title: | The impact of the Fundamental Review of the Trading Book: Evaluation on a stylized portfolio |
Journal title: | Journal of Risk |
Volume: | 26 |
Number: | 3 |
Pages: | 49 - 73 |
Reference: | Carvalho, Paulo V., Pinheiro, C., & Rodrigues, M. S. (2024). The impact of the Fundamental Review of the Trading Book: Evaluation on a stylized portfolio. Journal of Risk, 26(3), 49-73. https://dx.doi.org/10.21314/JOR.2023.014 |
ISSN: | 1465-1211 |
DOI (Digital Object Identifier): | 10.21314/JOR.2023.014 |
Keywords: | Capital requirement Basel Committee on Banking Supervision(BCBS) Trading book Fundamental Review of the Trading Book(FRTB) Market risk |
Abstract: | We investigate the impact of the Basel Fundamental Review of the Trading Book (FRTB) on banks’ market risk capital requirements under the Internal Model Approach. To do this, we take a stylized portfolio sensitive to the risk factors affected by FRTB, representative of a typical trading book. Our assessment spans the period 2007-2019. We find that FRTB will entail sizeable increases in regulatory capital intended to absorb market shocks. These increases hail not only from the change in the risk measure and taking longer liquidity horizons, the latter with greater impact on portfolios more focussed on bonds, but also from the strong limitation of portfolio diversification benefits. Our study should be of interest to bank supervisors and regulators, risk managers, and other decision-makers within the banking industry. |
Peerreviewed: | yes |
Access type: | Embargoed Access |
Appears in Collections: | BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica |
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