A regulatory analyst at a large multinational bank is assessing the regulatory mandates prescribed by the Basel Committee's Fundamental Review of the Trading Book (FRTB) standards. The analyst's review focuses on the evolution of the FRTB from the Basel I and Basel II.5 frameworks and includes examining the guidelines for implementing these standards. Based on this context, which statement accurately reflects the FRTB requirements?

Exam-Like

While Basel I and Basel ll.5 allowed market risk to be calculated at the trading desk level, FRTB requires that market risk be calculated on a firm-wide basis.

12.8%

While Basel I and Basel l.5 emphasized the use of a standardized approach to calculating market risk, FRTB encourages each bank to develop and rely on an internal models approach.

10.6%

FRTB standardizes the liquidity horizon used for all risk factors in the market risk capital calculation as 10 days, rather than the different horizons used in Basel I and Basel ll.5.

8.5%

FRTB requires that the stressed ES measure be used in determining market risk capital, rather than the VaR and stressed VaR measures that were used in Basel I and Basel ll.5,respectively

68.1%

Financial Risk Manager Part 2

Get started today

Comments