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International Regulation of Banking - Capital and Risk Requirements, 2nd Edition by Gleeson, Simon (4th October 2012) [OLD EDITION]

Part III Investment Banking, 14 Trading Book Models

From: International Regulation of Banking: Capital and Risk Requirements (2nd Edition)

Simon Gleeson

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From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved.date: 07 July 2020

Subject(s):
Regulation of banks — Basel 2 — Basel 3 — UK Financial Services Authority (FSA) — Bonds
14.01 Risk models come in a bewildering variety of types. However, for market risk purposes there are two types which may be used within the framework. The simplest is the ‘CAD 1’ model—named after the first Capital Adequacy Directive, which permitted such models to be sued in the calculation of regulatory capital. The VaR model is more complex. 14.02 CAD 1 models come in two forms—interest rate risk pre-processing models, and option risk aggregation models. An interest rate pre-processing model may—at its simplest—be applied to collections of interest rate...
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