Comment

Comment by John A Morrison on February 19, 2011 at 10:30pm

 

Interpretive issues regarding stressed value-at-risk Feb MMXI

http://www.asymptotix.eu/content/changes-market-risk-framework-will...

Comment by John A Morrison on October 27, 2009 at 1:16am

Analysis of the trading book quantitative impact study October 2009
Bank for International Settlements

The Basel Committee on Banking Supervision issued today the results of its recent trading book quantitative impact study, which assesses the impact of the revisions to the 1996 rules governing trading book capital. These revisions, which were originally published by the Committee in January 2009, were subsequently adopted in July 2009.

Excluding the so-called correlation trading portfolio, the study concludes that the changes to the market risk framework will increase average trading book capital requirements by two to three times their current levels, although the Committee noted significant dispersion around this average. Based on the results of the study, the Committee decided to maintain the original calibration as proposed in its January consultative package and as adopted in July 2009.

http://www.bis.org/publ/bcbs163.pdf?noframes=1

Comment by John A Morrison on January 20, 2009 at 10:28pm

David,

I saw you initially make this comment on Bionic Turtle, which I have the greatest regard for, by the way; (I guess it was you, right?) I agree with your position and analysis. If I were to offer an interpretation and it would be entirely speculative; arithmetically you are correct but the history is that banks globally have failed to grasp or implement proper “forward looking" risk quantification, I think there is consensus on that view globally now. This observation applies in the Pillar 2 stress test in particular (banking supervision as opposed to regulation) & one has to say that supervisors failed to assure that banks implemented even at the philosophical level any form of predictive analytic view of risk, even in the largest banks (with one or two exceptions) this "function” process, call it what you will was farmed out to ratings agencies and consultants and various other black boxes. What the Basel Committee is doing in my view is again nudging the banks gently (for that is all it can do and it is to be applauded for its perseverance) towards implementing "proper" forward looking predictive analytics, thus the confusion, the paper is a discussion proposition; within a highly charged political context and the committee is to be applauded for it, clearly it has learned from the resistance of recent years but is still tying to guide the banks to the correct manner of activity. Its up to the legislators now to decide what they will enforce, professionals like you and me and the academics know, now and have known what is necessary, lets see if the governments and quasi governments put their money and legislation where they keep promising the citizens they will do, behind proper, "grown up" banking supervision which the Basel Committee has been advocating since 2003/2004 in particular but long before that.

John

PS my formal work in this space can be seen here;-

http://www.union-legend.com/ecap.pdf
http://www.union-legend.com/index.php?page=references