MarketRisk VaRModels ARegulatoryDiscussion On the market risk measurement and Basel Accords Jean-PaulLaurent HassanOmidiFirouzi UniversitéParisI,PanthéonSorbonne LabexRefi1 September032015 AdvancedMethodsinMathematicalFinance Angers 1. LaboratoryofExcellenceforFinancialRegulation MarketRisk VaRModels ARegulatoryDiscussion 1 MarketRisk 2 VaRModels 3 ARegulatoryDiscussion Equityrisk:theriskofchangingintheequityprices. Foreignexchange(FX)risk:theriskofchanginginFX rates. Interestraterisk:theriskofchanginginterestratechange. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). Creditspreadrisk:theriskduetochangesincreditspread. MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Foreignexchange(FX)risk:theriskofchanginginFX rates. Interestraterisk:theriskofchanginginterestratechange. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). Creditspreadrisk:theriskduetochangesincreditspread. MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Equityrisk:theriskofchangingintheequityprices. Interestraterisk:theriskofchanginginterestratechange. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). Creditspreadrisk:theriskduetochangesincreditspread. MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Equityrisk:theriskofchangingintheequityprices. Foreignexchange(FX)risk:theriskofchanginginFX rates. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). Creditspreadrisk:theriskduetochangesincreditspread. MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Equityrisk:theriskofchangingintheequityprices. Foreignexchange(FX)risk:theriskofchanginginFX rates. Interestraterisk:theriskofchanginginterestratechange. Creditspreadrisk:theriskduetochangesincreditspread. MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Equityrisk:theriskofchangingintheequityprices. Foreignexchange(FX)risk:theriskofchanginginFX rates. Interestraterisk:theriskofchanginginterestratechange. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). MarketRisk VaRModels ARegulatoryDiscussion Market risk Market risk is the risk that the value of a trading portfolio of a bank will decrease (loss of a bank) due to the change in value of the followingriskfactors.(FRTBOctober2013) Equityrisk:theriskofchangingintheequityprices. Foreignexchange(FX)risk:theriskofchanginginFX rates. Interestraterisk:theriskofchanginginterestratechange. Commodityrisk:theriskofchangingincommodityprices (crudeoilprice,silver,etc.). Creditspreadrisk:theriskduetochangesincreditspread. 1 Standardizedapproach. 2 Internalmodel-basedapproach(IMB). TwomainchangesunderBaselIIIframework: 1 MovingfromValueatRisk(VaR)toExpectedShortfall(ES). 2 Stressedcalibration.Usingthemostsevere12-monthstress periodincomputingES. MarketRisk VaRModels ARegulatoryDiscussion Market risk and Basel III Approachestoriskmeasurement: 2 Internalmodel-basedapproach(IMB). TwomainchangesunderBaselIIIframework: 1 MovingfromValueatRisk(VaR)toExpectedShortfall(ES). 2 Stressedcalibration.Usingthemostsevere12-monthstress periodincomputingES. MarketRisk VaRModels ARegulatoryDiscussion Market risk and Basel III Approachestoriskmeasurement: 1 Standardizedapproach.