Ultimate access to all questions.
Explanation:
FRTB introduced the use of Expected Shortfall (ES) instead of Value at Risk (VaR). Under FRTB, Stressed Expected Shortfall is used for the market risk capital calculation. Option A is incorrect because FRTB introduces internal model approval at the trading desk level, not just on a firm-wide basis. Option B is incorrect because FRTB sets a higher bar for the internal models approach and places greater emphasis on a more rigorous standardized approach. Option C is incorrect because FRTB uses varying liquidity horizons (e.g., 10, 20, 40, 60, 120 days) depending on the risk factor, rather than a single standardized horizon.
No comments yet.
A
While Basel I and Basel II.5 allowed market risk to be calculated at the trading desk level, FRTB requires that market risk be calculated on a firm-wide basis.
B
While Basel I and Basel II.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.
C
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 II.5.
D
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 II.5, respectively.