1
$\begingroup$

I'm reading the consultative document of the BCBS on the Fundamental Review of the Trading Book: http://www.bis.org/publ/bcbs265.pdf

Table 2 on page 16 shows the liquidity horizons for 5 broad risk factors categories: interest rates, credit, foreign exchange, equities, and commodities.

I'm not sure about the meaning of 2 sub-categories: ATM volatility, and "other".

I understand volatility is a risk factor, but why using ATM volatility?

About the “other” sub-category, according to the BCBS, this is "meant to capture all risk factors that would not fall under any of the other buckets defined". For example, in the case of "Interest rate (other)", which product would fall in this category?

$\endgroup$
  • 1
    $\begingroup$ I think referring to the ATM vola should take into account that this is typically the most liquid sector of the market. OTM derivatives are in general less liquid. As for "interest rate (other)" I would think of e.g. inflation risk since on p. 58 no. 60 it is stated that inflation products shall be treated like interest rate products. $\endgroup$ – Dr_Be Jun 10 '16 at 12:43

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.