Advanced Concerts in Capturing Market Risk: A ... - ERM Symposium
Advanced Concerts in Capturing Market Risk: A ... - ERM Symposium
Advanced Concerts in Capturing Market Risk: A ... - ERM Symposium
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Requirements for SR VaR Model Approval<br />
Accord<strong>in</strong>g to MRR, SR VaR model needs to:<br />
Expla<strong>in</strong> historical price variation<br />
Capture concentration<br />
Be robust to adverse environment<br />
Be validated through backtest<strong>in</strong>g<br />
Capture Event and Default risk<br />
- This is a challenge to <strong>in</strong>clude <strong>in</strong> current VaR model<br />
- If not <strong>in</strong>cluded, apply prudential surcharge (for partially<br />
modeled SR):<br />
– If SR separated:1 x SR VaR<br />
– Else: 1 x Total <strong>Risk</strong> VaR<br />
<strong>Advanced</strong> Concepts <strong>in</strong> Captur<strong>in</strong>g <strong>Market</strong> <strong>Risk</strong>: A Supervisory Perspective, Chicago, IL, March 14, 2011 6
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