Questions tagged [banking-regulations]
The banking-regulations tag has no usage guidance.
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1answer
45 views
Calculating PD of commercial bank loan
I have two main options to calculate PD of a loan in a commercial bank; with and without machine learning.
On one hand, there are traditional methods such as Merton or KVM. On the other hand, I could ...
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0answers
21 views
Exposure at Default (EAD) models with and without the Credit Conversion Factor (CCF)
Exposure at Default (EAD) models with and without the Credit Conversion Factor (CCF). What are the pros and the cons of each, and which one should use a small commercial bank?
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1answer
46 views
Are Indices Regulated
Suppose that a bank (or any regulated body) wants to sell and ETF, replicating some index. Does that replicator have to adhere to the Basel accords?
Similarly, if a bank (or any regulated body) ...
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0answers
18 views
Quantitative impact of Dodd-Frank Act on risk management
The US Dodd-Frank Act (DFA) introduced mandatory central clearing of standard (e.g. plain vanilla) swaps for big financial institutions in the US in 2013.
It might be a broad question but: what have ...
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1answer
127 views
CCAR Shocks Scenario
I was going through CCAR-2018-severely adverse market shocks file and under the tab: Equity by Geography, I found these shocks.
I have two questions:
1) Whether the shocks to Vol points are in % ...
2
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0answers
45 views
Modelling approaches for interest rate risk in the banking book (IRRBB)
I am having a hard time researching papers that deal with the measurement of market risk in the banking book. The trading book as I see it is similar to asset management and as the name says the ...
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1answer
205 views
Market Risk - Trading and Banking book in light of Basel III
I can not understand whether Basel III (in the part of market risk) applies both to Trading Book and Banking book or just to the first one.
I have read that for what concerns Banking book you only ...
1
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1answer
87 views
Banking. What's the difference between provision and capital adequacy regulations? (purpose-wise)
Is such summary reasonable?
Provisions = predicted losses should reduce profit already now. (giving stimulus for a bank to make necessary responses already now)
Capital adequacy = bank must use ...
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2answers
80 views
Approach to add scenarios to OpRisk loss distribution
There is quite a lot of literature on OpRisk modelling. My question focuses on a loss distribution approach (LDA).
Let's look at a basic model. A Poisson-distributed $N$ and loss sizes $X_i$ and from ...
4
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1answer
118 views
Modelling operational risk for Basel pillar 2 (internal model for OpRisk VaR)
I am somewhat familiar with OpRisk for pillar 1. As far as I know OpRisk for pillar 1 will be replaced by standard approaches soon.
So what is left is proper modelling in pillar 2.
What are best ...
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0answers
49 views
Quantitative and regulatory aspects of portfolio integration in IRB credit portfolios
Say bank A buys a credit portfolio "B" (e.g. corporate loans or retail mortgage, ...) from bank B.
Bank A fulfills the the requirements of CRR (capital requirement regulation) for its existing ...
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0answers
26 views
Why do supervisors deem qualified revolving retail less risky than other retail exposure
I would like to gain more understanding of the economic background of some Basel formulas.
In the Basel guidelines in retail credit risk we have a risk weight function that depends on the correlation ...
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0answers
78 views
Application of Extreme Value Theory in banking liquidity risk analysis
The regulator forces banks to assess their (intraday) liquidity risk in normal and stressed conditions see e.g. BCBS 144 principle 9.
To me this sounds pretty much like a possible application of EVT ...
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4answers
115 views
Do banks have a target balance sheet?
I was wondering if banks have a certain target value when it comes to their balance sheet. I'm not speaking about the target leverage ratio or something like that. It's more like: "In the following ...
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1answer
315 views
What is non-reservable criticized exposure?
I'm new to credit risk. I wanted to know what is the meaning of reservable/non-reservable criticized exposure?
Can someone please help.
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0answers
1k views
How exactly does “arranged financing” work?
Prime brokers offer what is called "arranged financing" which allows hedge funds to gain maximum leverage - more than allowed under the Portfolio Financing platform. I understand there is an element ...
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1answer
1k views
Question regarding the Category 3 PRIIP MRM calculation
My question is regarding the European Commission regulation on standardizing the information in the key information documents for PRIIPs. In the Annex IV of the regulation, one can find the ...
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3answers
225 views
Is a bondfuture an IRD or a Credit Derivative?
I need to categorize a BondFuture trade in one of the five major asset classes and I am not sure if it should put it to the interest rate asset class or the credit asset class.
A quick (and dirty) ...
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2answers
5k views
What is curvature risk?
The BCBS has presented a new standard approach for measuring risk for a portfolio, which is based on sensitivities, that is “delta”, “vega” and “curvature” risks.
Delta risk measures the change in ...
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2answers
5k views
How is the formula for the VEV (VaR-equivalent volatility) in the PRIIP document derived?
The recent regulation (page 32) on PRIIPs requires to compute a VaR-equivalent volatility defined as
$$\mbox{VEV}=\frac{\sqrt{3.842-2\ln \mbox{VaR}}-1.96}{\sqrt{T}}$$
Does anyone have an idea how ...
13
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1answer
1k views
Cheatsheet/summary of financial laws and regulations
I wonder whether there are or we can collect cheat-sheets for the various international regulations of the financial markets.
There is e.g. the Dodd-Frank act for the US. Can we gather cheat sheets ...
4
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0answers
236 views
Discrete Trading to reduce speculation
I recently read a paper by Terje Lensberg (2014) "Costs and benefits of financial regulation: Short-selling bans and transaction taxes" where he analyzed the effects of financial regulation (short ...
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1answer
181 views
Is it possible for two securities to have the same first 8 characters of a cusip, but differ in the check sum?
CUSIP is a 9 character long identifier. The last digit is a check sum checking the first 8 previous characters. This seems to me that it is not possible for two securities to have the same 8 ...
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1answer
214 views
AT1 ratio, Core T1 ration and CET1 ratio
I would like to first know the precise definition of each one of those 3 ratios as well as there differences. On the web there is bit of a mess on the explanations. I could not find a simple and clear ...
4
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3answers
132 views
How does US banks ensure that other country's banks aren't counterfeiting USD?
I have had this question for a long time. For example, if I wire 50M USD from China
to the US, does the Chinese bank physically deliver 50M USD cash to the US bank? or is it just changing a number in ...
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0answers
106 views
How will the European requirements for prudent valuation affect derivatives pricing?
The European Banking authority has published the
"EBA consults on draft technical standards on prudent valuation".
How will these requirements for prudent valuation affect derivatives pricing, if at ...
