Questions tagged [market-risk]
The market-risk tag has no usage guidance.
26 questions
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Stock return variance decomposition
Variance Decomposition for Stock Returns: Issues with Weighted Returns and Risk-Free Rate Adjustments
I am attempting to replicate the variance decomposition of stock returns following the procedure ...
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171
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book for (investment banking) market risk overview [duplicate]
what is a good intro book / course / source of knowledge on the topic of Market Risk for investment banking? I'm IT person cooperating with quants market risk team, and found myself either missing ...
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From parameter risk (sensitivities) to market risk (sensitivities)
In models where the underlying is not modeled directly - such as in the HJM framework or short rate models - how does one then compute the Greeks, i.e. sensitivites wrt. market variables.
As an ...
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stressed VaR and VaR [closed]
Can someone please explain to me how most banks calculate their stress VaR. is there a regulatory-defined time series, such as the 2008 to 2009 period, to apply to the current position? My ...
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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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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 ...
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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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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(...
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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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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 ...
- 127
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120
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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) ...
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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?...
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184
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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 $S = 10$.
$S$...
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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
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255
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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 ...
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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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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 ...
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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 ...
- 455
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255
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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 ...
- 1,074
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222
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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 ...
- 698
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100
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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.
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165
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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}_{...
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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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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 ...
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341
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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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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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