Comprehensive Risk Measure Floor

Mpt is a standard.

Comprehensive risk measure floor.

Comprehensive risk capital charge subject to strict qualitative minimum requirements as well as stress testing requirements. Undoubtedly crm remains the most challenging and ambiguous measure applied to the correlation trading book. An additional response to the crisis is the introduction of a stressed value at risk requirement. Risk measures are statistical measures that are historical predictors of investment risk and volatility and they are also major components in modern portfolio theory mpt.

Both are value at risk type measures projecting losses over a one year capital horizon at a 99 9 confidence level and are. One of the main elements of basel 2 5 refers to the comprehensive risk measure employment for correlation trading positions which assesses default and migration risk of the underlying exposures. This paper presents a modelling framework for the incremental risk charge irc and comprehensive risk measure crm as the new capital requirements for market risks in a bank s trading book basel 2 5. This paper based on case studies with five universal banks from europe and north america aims to investigate which types of comprehensive risk measure crm models are being used in the industry the challenges being faced in implementation and how they are being currently rectified.

For regulatory reporting purposes the comprehensive risk measure represents the higher of the internal model spot value at the reporting dates their preceding 12 week average calculation and the floor where the floor is equal to 8 of the equivalent capital charge under the standardized approach securitization framework. Rwa at end of reporting period column comprehensive risk measure. The crm floor of 8 per cent of the capital charge for specific risk according to the standardised measurement method bcbs 2011 is the.