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A Regulatory Algorithm for Determining Capital Requirements as a Stressed Value-at-Risk
Company: Bundesanstalt für Finanzdienstleistungsaufsicht
Company Url: Click here to open
Year Of Publication: 2011
Month Of Publication: August
Pages: 39
Download Count: 10
View Count: 1589
Comment Num: 0
Language: English
Source: working paper
Who Can Read: Free
Date: 8-27-2011
Publisher: Administrator
This paper puts forward a proposal for a revised standardized measurement method for market risk for discussion. The proposed algorithm combines the concept of a stressed value-at-risk with historical simulation: Historical episodes to which the portfolio would have been vulnerable are selected under the algorithm. The capital charge is determined as the loss over a number of combined “bad” episodes using exact revaluation. In this way, the proposed algorithm recognises hedging and diversification effects in a risk-sensitive, but conservative way based on the changes of pricing parameters observed in those “bad” episodes.
Gebhard, Rüdiger Sign in to follow this author
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