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E-vol (Market risk (Correlation under stress? is this intact or broken,…
E-vol
Market risk
Mkt risk stress grid, 1 in 10 or in 50? moves between Nenegate and 08 quite similar for rates and FX
Correlation under stress? is this intact or broken, has this been intact in the last 2 stress periods?
We take into account the diversification of the book predominatly interest rates and FX, this correlation has stayed intact in idio syncratic stresses
Close out fairly ok
Although fairly credible, the current method is very punitive using reg capital principles
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Concentrations in the following; inflation, options
Credit risk
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Concentrations
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Do these losses occur in Y1 or some of them in Y2? where we still consider the whole sector to default
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Framework
what level of confidence are we working towards? 75%, 90%
What is our approach given the dynamic nature of GM between Mkt & Crdt risk. this refers to GM's ability to hedge/cut positions or build positions in other risk types
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Additive nature of the framework, can this be changed account for some diversification given different risk types in one business
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How did we do it
Do you introduce some of the methodology issues on mkt risk, punitive nature of close out costs, credit risk (concentrations or XVAs?), Business risk ( timing)
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Might be useful to put the loss relative to income generated? mkt risk losses as a % of mkt risk inc? crd and b risk?