Carey, Solvency, Liquidity and Other Regulation Study Notes contain 23 pages covering the following learning objectives:
* Describe and calculate the stressed value-at-risk measure introduced in Basel 2.5, and calculate the market risk capital charge.
* Explain the process of calculating the incremental risk capital charge for positions held in a bank’s trading book.
* Describe the comprehensive risk (CR) capital charge for portfolios of positions that are sensitive to correlations between default risks.
* Define in the context of Basel III and calculate where appropriate
* Tier 1 capital and its components
* Tier 2 capital and its components
* Required Tier 1 equity capital, total Tier 1 capital, and total capital
Describe the motivations for and calculate the capital conservation buffer and the countercyclical buffer, including special rules for globally systemically important banks (G-SIBs).
Describe and calculate ratios intended to improve the management of liquidity risk, including the required leverage ratio, the liquidity coverage ratio and the net stable funding ratio.
Describe the mechanics of contingent convertible bonds (CoCos) and explain the motivations for banks to issue them.
Explain motivations for “gold plating” of regulations and provide examples of legislative and regulatory reforms that were introduced after the 2007 – 2009 financial crisis.
After reviewing the notes, you will be able to apply what you learned with practice questions.
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