An assessment of the Fundamental Review of the Trading Book: the capital requirement impact on a stylised financial portfolio
by Chiara Pederzoli; Costanza Torricelli
International Journal of Banking, Accounting and Finance (IJBAAF), Vol. 12, No. 4, 2021

Abstract: This paper assesses the impact on capital requirements of the Fundamental Review of the Trading Book (FRTB) based on a stylised financial portfolio sensible to the risk factors affected by the review. Our results show the order of magnitude of the increase across the two regulations and the two possible approaches: the standard approach and the internal model approach. We further disentangle the components of the expected increase implied by the FRTB. The most interesting result emerges for the internal model approach, whereby the increase in the capital charge is attributable not only to the change in the risk measure and the inclusion of longer liquidity horizons, but most importantly to the dampening of the diversification benefit.

Online publication date: Fri, 29-Oct-2021

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Banking, Accounting and Finance (IJBAAF):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com