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Part III Investment Banking, 12 The Trading Book

From: Gleeson on the International Regulation of Banking (3rd Edition)

Simon Gleeson

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 21 May 2024

Regulation of banks — Credit risk — Capital markets — Basel 2 — Basel 3 — Basel committee on Banking Supervision

This chapter begins by discussing market risk in the Basel framework. Market risk was a relative latecomer to the Basel framework. Although the original Accord was signed in 1988, it was only in 1996 that the amendment to incorporate market risks was implemented. Market risk in the trading book is comprised of two significant components: position risk, which measures the risk of a change in the value of assets held; and counterparty credit risk, which measures the riskiness of counterparties to derivatives, options, and other trading positions. The remainder of the chapter covers trading book eligibility under Basel 2.5 and Basel 3.

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