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Capital allocation under the Fundamental Review of Trading Book

Luting Li and Hao Xing

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Abstract: Facing the FRTB, banks need to allocate their capital to each business units or risk positions to evaluate the capital efficiency of their strategies. This paper proposes two computationally efficient allocation methods which are weighted according to liquidity horizon. Both methods provide more stable and less negative allocations under the FRTB than under the current regulatory framework.

Date: 2018-01, Revised 2019-01
New Economics Papers: this item is included in nep-cba, nep-cmp and nep-rmg
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