Bank's middle office analytics, risk modelling and comparative Basel regimes

Shahid Waseem Anjum

International Journal of Monetary Economics and Finance, 2018, vol. 11, issue 4, 354-362

Abstract: Volatility is the focus of banks' market risk measurement, management and reporting exercises. Risk measures may be either internal or external ones. Regulatory approaches cover different risk categories. Basel III's external risk measures may use a standardised approach or an advanced approach for market risks where measuring value-at-risk threshold is important for the calculation of the capital charge of market risk. Besides, Basel III has introduced stressed VaR, specific risks, incremental risk charge and standardised capital charge. If a bank's forecasts for VaR model are violated more than nine times in any financial year, the bank may be required to adopt the standardised approach thus incurring a more regulatory capital charge and a loss for the bank. Keeping this importance in mind, this study provides a comparative description of recent Basel regimes, volatility and Value-at-Risk models, mathematical characteristics of Basel measures and their robustness.

Keywords: volatility models; value at risk estimation; multivariate techniques; Basel III compliance; regulatory capital charge. (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:11:y:2018:i:4:p:354-362

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