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The impact of the Fundamental Review of the Trading Book: A preliminary assessment on a stylized portfolio

Chiara Pederzoli and Costanza Torricelli ()

Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) from Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi"

Abstract: The aim of this paper is to gauge the impact in terms of capital requirements of the Fundamental Review of the Trading Book (FRTB). To this end we take a stylized portfolio sensible to the risk factors mostly affected by the review and we implement the new regulation both under the Standard Approach (SA) and the Internal Model Approach (IMA). Our results provide an order of magnitude of the increase across the two regulations and the two approaches (SA and IMA), and disentangle the expected increase implied by the FRTB in its main effects both for the SA and IMA approach. Our analyses prove a very relevant increase especially under the SA and underscore possible implications of the review both in terms of regulamentary model’s choice and business strategies.

Keywords: trading portfolio; VaR; Expected shortfall; bank regulation (search for similar items in EconPapers)
JEL-codes: E30 E44 G01 G10 G28 (search for similar items in EconPapers)
Pages: pages 30
Date: 2019-01
New Economics Papers: this item is included in nep-fmk and nep-mac
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