Bank Capital Regulation Of Trading Portfolios
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Bank Capital Regulation Of Trading Portfolios
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Author : Gordon J. Alexander
language : en
Publisher:
Release Date : 2017
Bank Capital Regulation Of Trading Portfolios written by Gordon J. Alexander and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
In setting minimum capital requirements for trading portfolios, the Basel Committee on Banking Supervision (1996, 2011a, 2013) initially used Value-at-Risk (VaR), then both VaR and stressed VaR (SVaR), and most recently, stressed Conditional VaR (SCVaR). Accordingly, we examine the use of SCVaR to measure risk and set these requirements. Assuming elliptically distributed asset returns, we show that portfolios on the mean-SCVaR frontier generally lie away from the mean-variance (M-V) frontier. In a plausible numerical example, we find that such portfolios tend to have considerably higher ratios of risk (measured by, e.g., standard deviation) to minimum capital requirement than those of portfolios on the M-V frontier. Also, we find that requirements based on SCVaR are smaller than those based on both VaR and SVaR but exceed those based on just VaR. Finally, we find that requirements based on SCVaR are less procyclical than those based on either VaR or both VaR and SVaR. Overall, our paper suggests that the use of SCVaR to measure risk and set requirements is not a panacea.
Bank Capital And New Regulatory Requirements For Risks In Trading Portfolios
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Author : hulusi inanoglu
language : en
Publisher:
Release Date : 2020
Bank Capital And New Regulatory Requirements For Risks In Trading Portfolios written by hulusi inanoglu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
This article examines the impact of the new supervisory standards of Basel 2.5 and Basel III for bank trading portfolios with regards to the additional capital requirements developed to mitigate liquidity risk and credit risk. Using the incremental risk charge (IRC), the authors estimate risk measures in several alternate contexts. They find a potentially material increase in capital requirements above and beyond that concluded in the far-ranging impact studies conducted by the international supervisors. This effect is accentuated for financial or sovereign sectors as compared with industrial sectors, and regulatory capital is larger than economic capital. They compare credit risk models and find that the multivariate model reveals larger capital estimates for the financial and sovereign sectors by orders of magnitude versus the industrial sector or the Basel II model. Finally, in a Bayesian experiment, they find that the new requirements may introduce added uncertainty into risk measures as compared with existing approaches.
International Convergence Of Capital Measurement And Capital Standards
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Author :
language : en
Publisher: Lulu.com
Release Date : 2004
International Convergence Of Capital Measurement And Capital Standards written by and has been published by Lulu.com this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Bank capital categories.
A Comparison Of The Original And Revised Basel Market Risk Frameworks For Regulating Bank Capital
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Author : Gordon J. Alexander
language : en
Publisher:
Release Date : 2017
A Comparison Of The Original And Revised Basel Market Risk Frameworks For Regulating Bank Capital written by Gordon J. Alexander and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Recognizing that many banks suffered trading losses that notably exceeded their minimum capital requirements during the recent crisis, the Basel Committee on Banking Supervision (2011) revised its regulatory framework for trading portfolios. In this paper, we compare: (1) the relative effectiveness of risk management systems based on the original and revised frameworks in controlling tail risk; and (2) the relative adequacy of these frameworks in setting minimum capital requirements. Our main findings are as follows. First, both systems allow the selection of portfolios with substantive tail risk, but one based on the revised framework tends to be less effective in controlling tail risk. Second, the minimum capital requirements set by the revised framework are much less likely to be wiped out by trading losses than those set by the original framework. Hence, on balance, the revised framework improves upon the original framework. We also suggest further improvements for consideration by bank regulators.
Revisiting Risk Weighted Assets
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Author : Vanessa Le Leslé
language : en
Publisher: International Monetary Fund
Release Date : 2012-03-01
Revisiting Risk Weighted Assets written by Vanessa Le Leslé and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-03-01 with Business & Economics categories.
In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.
Bank Capital Restrictions Portfolio Mix And Capital Structure
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Author : Anne L. Beatty
language : en
Publisher:
Release Date : 1994
Bank Capital Restrictions Portfolio Mix And Capital Structure written by Anne L. Beatty and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Bank capital categories.
Does The Basle Capital Accord Reduce Bank Fragility An Assessment Of The Value At Risk Approach
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Author : Gordon J. Alexander
language : en
Publisher:
Release Date : 2007
Does The Basle Capital Accord Reduce Bank Fragility An Assessment Of The Value At Risk Approach written by Gordon J. Alexander and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We examine the economic implications arising from a bank using a VaR-constrained mean-variance model for the selection of its trading portfolio as a consequence of the Basle Capital Accord. Surprisingly, we show that when a VaR constraint is imposed, it is plausible that certain banks will end up selecting quot;riskierquot; portfolios than they would have chosen in the absence of the constraint. Accordingly, regulators such as the Basle Committee on Banking Supervision should be aware that allowing a bank to use VaR to determine its minimum regulatory capital may increase its fragility. Alternatives to VaR-based bank capital regulation that mitigate or even preclude its perverse implications are presented.
Capital Adequacy Beyond Basel
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Author : Hal S. Scott
language : en
Publisher: Oxford University Press
Release Date : 2005-02-17
Capital Adequacy Beyond Basel written by Hal S. Scott and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-02-17 with Business & Economics categories.
This book is timely since the Basel Committee on Banking Supervision at the Bank for International Settlements is in the process of making major changes in the capital rules for banks. It is important that capital adequacy regulation helps to achieve financial stability in the most efficient way. Capital adequacy rules have become a key tool to protect financial institutions. The research contained within the book covers some key issues at stake in the capital requirements for insurance and securities firms. The contributors are among the leading scholars in financial economics and law. Their contributions analyze the use of subordinated debt, internal models, and rating agencies in addition to examining the effect on capital of reinsurance, securitization, credit derivatives, and similar instruments.
Credit Portfolio Management
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Author : Charles Smithson
language : en
Publisher: John Wiley & Sons
Release Date : 2003-04-07
Credit Portfolio Management written by Charles Smithson and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-04-07 with Business & Economics categories.
A cutting-edge text on credit portfolio management Credit risk. A number of market factors are causing revolutionary changes in the way it is measured and managed at financial institutions. Charles Smithson, author of the bestselling Managing Financial Risk, introduces a portfolio management approach to credit in his latest book. Understanding how to manage the inherent risks of this market has become increasingly important over the years. Credit Portfolio Management provides readers with a complete understanding of the alternative approaches to credit risk measurement and portfolio management. This definitive guide discusses the pricing and managing of credit risks associated with a variety of off-balance-sheet products such as credit default swaps, total return swaps, first-to-default baskets, and credit spread options; as well as on-balance-sheet customized structured products such as credit-linked notes, repackage notes, and synthetic collateralized debt obligations (CDOs). Filled with expert insight and advice, this book is a must-read for all credit professionals. Charles W. Smithson, PhD (New York, NY), is the Managing Partner of Rutter Associates and Executive Director of the International Association of Credit Portfolio Managers (IACPM). He is the author of five books, including The Handbook of Financial Engineering and Managing Financial Risk (now in its Third Edition).
Optimal Risk Return Trade Offs Of Commercial Banks
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Author : Jochen Kühn
language : en
Publisher: Springer Science & Business Media
Release Date : 2006-09-28
Optimal Risk Return Trade Offs Of Commercial Banks written by Jochen Kühn and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-09-28 with Business & Economics categories.
This book criticizes the fact that profitability measures derived from capital market models such as the Sharpe ratio and the reward-to-VaR ratio are proposed for loan portfolios, although it is not proven whether their risk-return trade-offs are optimal for banks. The authors demonstrate that even the reward-to-VaR ratio, which is developed for valuating loan portfolios, can be highly misleading. They also show how market discipline, capital requirements, and insured deposits affect decision-making.