Risk Measurements for the Trading Book von Edu Pristine

Dozent des Vortrages Risk Measurements for the Trading Book

Edu Pristine

Trusted by Fortune 500 Companies and 10,000 Students from 40+ countries across the globe, EduPristine is one of the leading International Training providers for Finance Certifications like FRM®, CFA®, PRM®, Business Analytics, HR Analytics, Financial Modeling, Operational Risk Modeling etc. It was founded by industry professionals who have worked in the area of investment banking and private equity in organizations such as Goldman Sachs, Crisil - A Standard & Poors Company, Standard Chartered and Accenture.

EduPristine has conducted corporate training for various leading corporations and colleges like JP Morgan, Bank of America, Ernst & Young, Accenture, HSBC, IIM C, NUS Singapore etc. EduPristine has conducted more than 500,000 man-hours of quality training in finance.
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... different time horizons. Scaling of short horizon VaR to a longer time horizon is not accurate enough. Short horizon VaR is easier to compute for large portfolios but may not be accurate and may need larger time horizons. However in case of large time horizons, the characteristics of portfolio change and must be incorporated. Effect of time varying volatility ...

... Endogenous liquidity accounts for the price effect of liquidating positions and is dependent on size of trades. Such risk is present when market orders are large enough to move the price. It captures the impact on prices based on trading volumes and is easily observable during liquidity ...

... in the left tail is not captured by VaR. VaR is sensitive to the scaling of time horizon since square root method usually underestimates long horizon VaR. VaR is not subadditive which implies that VaR of a portfolio can be greater than ...

... change significantly compared to normal market conditions. Thus it becomes important to compute correlations under stress and use these measures for stress VaR computation During 2008 crisis, most of the models failed to capture the risks since the correlations used for Economic Capital modelling were based on normal market data ...

... methods used for aggregating risks. Compartmentalized method based on summation of risks whereas unified method based on interaction between different risks. For capital requirement purposes, Banks use compartmentalized approach where they compute market, credit & operational risks separately and sum them to calculate total capital requirement. ...

... Selection of approach will depend on the quantum of integrated risks vs. quantum of individual risks which can be measured by computing ratio of unified capital to compartmentalized capital. Diversifiication effects which result in a ratio of less than one, which is usually observed with Top Down Approaches. ...

... Inter risk diversification index increases as tail quantile increases suggesting more diversification as we move farther in the tail. Capital requirements under unified approach can be ...

... prices result in further asset purchase and creation of a asset bubble. Active risk management significantly changes the Risk Weighted Assets & CRAR i.e., measure of leverage which will impact risk premium and market volatility observed. During boom, equity of bank increases which means VaR thresholds can be increased by Banks which implies further risk can be ...