Revision of the quantification of market risk in the Basel III regulatory framework

Gyöngyi Bugár and Anita Ratting ()
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Anita Ratting: Magyar Nemzeti Bank

Financial and Economic Review, 2016, vol. 15, issue 1, 33–50

Abstract: The purpose of our study is to provide an overview of the revisions made to the Basel III regulatory framework in the aftermath of the 2007 crisis, with regard to measuring the risk associated with positions included in the trading book. The calculation of the regulatory capital requirement (i.e. the capital to be earmarked for covering the losses of trading book portfolios exposed to market risk) is based on the value-at-risk (VaR) to date. The literature pointed out the weaknesses of VaR as early as the turn of the millennium, and the financial crisis of 2007 only confirmed the inadequacy of the previous system. Nevertheless, moving the Basel regulatory framework to a new system of risk measurement was only put on the agenda after a significant delay. Formulating the details of the changes affecting the trading book has gained momentum in recent months, resulting in a series of consultative documents, issued by the Committee, which constitute the foundation for the impending new recommendations.

Keywords: market risk; Basel regulatory framework; Value-at- Risk (VaR); expected shortfall (ES) (search for similar items in EconPapers)
JEL-codes: D81 G21 G28 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:15:y:2016:i:1:p:33-50

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