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Questions about Notes R52.P2.T7 (Basel II)

Thread starter #1
Hello, David:

Please excuse me if you have already been pointed at what I mention below and you are in the process of updating the notes.

On page 13, the following is said:
"In the standardized approach, the capital requirement is the sum of the requirements for:
Debt (interest rate risk)
Equities
Currencies
Commodities"

In the formula below, we can see that a market risk capital charge specific to options is added. I believe this is correct, and if so I would suggest adding this to the above text as to avoid confusion.

Furthermore, on page 14, while describing the requirements for IMA of market risk capital, the text says that the model has to be updated in a monthly basis, while the figure just below says "quarterly updating". Which one is it? I seem to recall that it was quarterly while local supervisors could increase this frequency, but I am not entirely sure.

Thank you and keep up the good work

Joaquín
 

David Harper CFA FRM

David Harper CFA FRM
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#2
Hi @joacogimeno Yes, I do agree on both counts:
  • The diagram probably should be updated to reflect the inclusion of options (in addition) to equities, as a building block under the standardized method
  • The previous quantitative standard was quarterly, but the July 2009 revision changed the update frequency to monthly; see page 14 of http://www.bis.org/publ/bcbs193.pdf
Thanks for your notes, I've tagged them into the revision. Thanks,
 
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