VaR models to calculate the minumun regulatory capital at market risk
Keywords:
Value-at-risk, Basel, financial regulation, market risk
Abstract
The undergoing overhaul of the Basel III market risk regulatory framework addresses the possibility of replacing VaR models with an alternative method for calculating minimum capital requirements. This paper will calculate the regulatory capital for a hypothetical equity portfolio of 20 of the main stocks in the S&P500, between 2000 and 2014. The RiskMetrics methodology and GARCH(1,1) models are used to estimate volatilities, covariances and correlations. Our results show that the regulatory capital calculated using Basel II rules is at all times above realized portfolio losses.Format
Crossmark
How to Cite
Stupariu, P., Ruiz, J. R., & Vilariño, Á. (2015). VaR models to calculate the minumun regulatory capital at market risk. Papeles de Europa, 28(1), 27-59. https://doi.org/10.5209/rev_PADE.2015.v28.n1.50180
Section
Special issue
License
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