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Standardized Equity Risk Framework Guide

This document outlines different frameworks for calculating capital requirements for various trading book and banking book positions. It shows that positions can either be subject to a standardized charge, modeled charge using internal models (VAR and stress VAR), or a combination approach depending on the type of position and whether the bank's internal risk models have been approved. The document provides a high-level overview of how capital requirements are determined for different position categories.

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lardogious
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308 views1 page

Standardized Equity Risk Framework Guide

This document outlines different frameworks for calculating capital requirements for various trading book and banking book positions. It shows that positions can either be subject to a standardized charge, modeled charge using internal models (VAR and stress VAR), or a combination approach depending on the type of position and whether the bank's internal risk models have been approved. The document provides a high-level overview of how capital requirements are determined for different position categories.

Uploaded by

lardogious
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Standard Charge Model Charge Framework

Trading Book Positions


& Other FX and Commodities Positions
(i.e., “Covered Positions”)

100% Risk
Direct Real Estate
Weight Credit
Holdings Securitization Warehouse
Framework
Equity Positions
Private Equity/Hedge
Framework Fund Equity Positions
IRB Model Standardized
Trading Book Framework
Standardized Modeled

(Multiplier × Current VaR) + (Multiplier × Stressed VaR)


+ one Specific Risk Assessment below1

Comprehensive Risk
“Correlation Trading” Position or
Model (CRM)
Liquid Hedge if VaR Specific
Max of: “Correlation Trading” Position if Risk approved & CRM approved
VaR Specific Risk NOT approved
or CRM NOT approved
Net long Net short
positions under positions under
Standardized Standardized
Securitization Securitization
Framework Framework

Securitization
Framework Securitization Position
(If Not Correlation Trading) Incremental
Interest Rate or Credit Position if VaR Specific Risk Risk Charge
IRB Standardized approved & IRC Model approved (IRC) Model
Credit Firm Credit Firm

Interest Rate or Credit Position if VaR Specific Specific Risk


IRB Look-up Standardized Look-up
Risk NOT approved or IRC Model NOT approved
Table Look-up Table Table

No Traditional Corporate Equity Positions if


Additional VaR Specific Risk approved Standard
Charge Traditional Corporate Equity Positions if VaR
Charge (8%)
Specific Risk NOT approved

1Positions not encompassing “issuer” risk, such as commodities contracts, do not require a separate Specific Risk charge, only appropriate modeling within VaR.

Contact: [email protected]

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