Questions tagged [market-risk]

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2 votes
0 answers
101 views

All I need to know about FRTB

I know the basics of FRTB (Fundamental Review of the Trading Book) but I can see that most of the risk management books have maximum a chapter dedicated to FRTB and are relatively old so don't reflect ...
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1 vote
0 answers
41 views

Allocation methodologies under FRTBA SA

Hi I have been comparing several methodologies for allocation of standalone capital charge to the underlying desks and I keep getting very vague results on which allocation is superior in terms of ...
4 votes
0 answers
111 views

Market Risk FRTB - How to demonstrate that the linear transformation of the alternative definition of Vega reflects the actual vega risk?

I have a question regarding the use of alternative vega sensitivities (bank system sensitivities) in the context of the Vega Risk Charge of the SBM. The article 325t.6 of the CRR allows banks to ...
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1 vote
1 answer
114 views

Market price of risk of different maturities

T. Bjork Arbitrage Theory in Continuous Time Proposition 23.1 "Assume that the bond market is free of arbitrage. Then there exists a process $\lambda$ such that the relation $\frac{\alpha_T(t)-r(...
3 votes
2 answers
84 views

Estimating risk aversion from option bid-ask spreads

Is it possible to use bid-ask spreads on contracts from a specific tenor to estimate risk aversion and use it to transform risk-neutral density into real-world density?
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1 vote
0 answers
191 views

FRTB Spearman correlation coefficient definition

I am just writing my thesis and would like to understand the spearman correlation coefficient definition within the FRTB. Somehow it is not clear from the definition. The reason what I don't ...
  • 107
0 votes
1 answer
69 views

Market vs. Credit Loss distributions: differences

If we define the Loss distribution of a portfolio as $$L_{t+h}=-(V_{t+h}-V_{t})$$ where $V_{t}$ is the value of the portfolio at time $t$ and $h$ is the time horizon, which are the (graphical) ...
  • 137
0 votes
1 answer
85 views

How to calculate value at risk in accordance with Basel?

I would greatly appreciate if you could let me know whether Value at Risk should be calculated for net open position (foreign currency assets-foreign currency liabilities) or for foreign currency cash?...
  • 115
0 votes
0 answers
145 views

Approximation of portfolio VaR (after mapping) when Delta and Gamma both equal zero

As titled, I am having trouble estimating the VaR of a portfolio mapped as a function of a single risk factor $S$, in the form : $$V(S) = S^3 - 30S^2 + 300S + 150$$ with current value $S = 10$. $S$...
1 vote
0 answers
48 views

How to measure specific risk charge?

IFRS requires banks to compute different risks including market risk based on Basel iii. To do so, the capital requirement is defined as follows: $$max(VaR_{t−1},m_c × VaR_{avg}) + SRC$$ $SRC$ is ...
  • 115
1 vote
0 answers
123 views

FRTB SBA Delta calculation for GIIR

In FRTB Sensitivity based approach delta calcualtion forg GIIR we have the defined vertices 3M, 6M 1Y, 2Y,5Y,10Y,15Y,20Y,30Y. Say for USD bucket we have risk factors as USD-OIS and USD-3M curve, when ...
3 votes
0 answers
205 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 ...
  • 13.3k
1 vote
0 answers
170 views

Explanation and Application of Quantile Regression of Value-At-Risk

Self-learner here. Please, excuse me if I am asking a Question already answered, but the explanations that I find online, just seem to be a bit hard for me. I am currently trying to apply the Basel ...
1 vote
1 answer
748 views

Expected Shortfall Basel III style: what is the idea?

I would like to do a qualitative question about the Expected shortfall in the Basel 3 document. First of all let me introduce few definitions. Suppose to have a portfolio $P$ depending on a family ...
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1 vote
1 answer
214 views

Integrating Credit and Market VaR

For a portfolio of fixed income, is there a framework or model for providing a VaR-type estimate that takes into account not only market risk factors, but also the loss associated with the probability ...
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1 vote
0 answers
215 views

Liquidity horizons of risk factors categories

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 ...
  • 678
0 votes
3 answers
100 views

What information should be delivered to the client so they have enough information to manage their exchange rate risks? [closed]

The client can be a CFO or CEO. The information can indicators, charts, graphs, statistics, ratios, etc. I know the VaR is one of them.
1 vote
1 answer
142 views

Expected Shortfall alternative formulation

Define: $$q_\alpha(F_L)=F^{\leftarrow}(\alpha)=\inf\lbrace{x\in \mathbb{R}\mid F_L(x)\geq \alpha\rbrace}=VaR_\alpha(L)$$ I want to prove that: $$ES_\alpha = \frac{1}{1-\alpha}\mathbb{E}[\mathbb{1}_{...
  • 113
2 votes
3 answers
373 views

Books on Market Risk for practice problems

Are there any books with practice problems for Market Risk, with special emphasis on vanilla and exotic options? Or should I look into old exam papers from FRM as sold by Kaplan/GARP?
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2 votes
0 answers
238 views

Risk measures, Risk Management and Financial Risk Area

I'm currently searching material about market risk and I learned about coherent risk measures, VaR, CVaR (or expected shortfall), volatility. All that because I have to make a Financial Risk Area for ...
  • 165
2 votes
2 answers
323 views

Liquidity in a market risk model based on historical simulation

I would like to model liquidity effects in my risk model which is based on historical simulation. I would like to develop a practical solution that still captures liquidity effects. Most probably I ...
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8 votes
2 answers
5k views

What makes IRC a market risk?

Since modeling leaves complete freedom we can assume both market and credit risks can enter the picture. However the minimum requirement is (migrations and) defaults simulation, how does this ...
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