analyze the consequences of the Federal Reserve Board's proposed pre-commitment approach (PCA) for setting market risk capital … requirements for bank trading portfolios. Under the PCA, a bank determines its own market risk capital requirement and is subject … to a known regulatory penalty should its trading activities generate subsequent losses that exceed its market risk …

risk premia. This paper demonstrates how to extract the expected policy path under the assumption that risk premia are … constant over time, and under a simple model that allows risk premia to vary. In the latter case, the risk premia are … the risk premia on these futures contracts vary over time. The impact of this variation is fairly limited for futures …

") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices, and risk … asset market phenomena. While the variation in dividend yields and the equity risk premium is primarily driven by risk …