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Calculating Capital Requirements via Historical Simulation in EU Candidate States
Year Of Publication: 2006
Month Of Publication: September
Pages: 20
Download Count: 497
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Comment Num: 0
Language: EN
Who Can Read: Free
Date: 7-4-2007
Publisher: Administrator
Market risk arises from movement in the underlying risk factors of a particular security, suchas: equity prices, interest rates, exchange rates and commodity prices. With the approval ofBasle Committee for Banking Supervision and European Commission, of using internallydeveloped market risk measurement models to calculate bank’s market risk provisions, theinterest for market risk models has significantly increased. Because financial markets of theEU candidate states significantly differ from the developed markets, applying VaR modelsdeveloped and tested in the developed and liquid financial markets, to the volatile and shallowfinancial markets of EU candidate states is highly questionable. This paper tests whetherusing a wide spread market risk measurement model such as Historical simulation is adequatefor forming capital requirements in the banks operating in the EU candidate states. In thispaper, the stock market indexes of Bulgaria, Romania, Croatia and Turkey are used to test theadequacy of forming capital requirements based on Historical simulation. The testing isperformed out of the sample, with four different observation periods
Zikovic, Sasa Sign in to follow this author
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