Revised standards for capital requirements for market risks in a bank's trading book have been issued as a result of the Fundamental Review of the Trading Book. Under the new standards, default risk needs to be measured and capitalized through a dedicated Default Risk Charge (DRC). While...

Computational challenges associated with calculating risk measures are inherent to many applications in financial institutions. An example is the need to revalue portfolios of trading positions hundreds or thousands of times to determine the future distribution of their present values and risk...

While machine learning and its many variants are becoming established tools in quantitative finance, their application in a risk measurement context is less developed. This paper uses a scheme from probability theory and statistics – Gaussian Processes – and applies the corresponding...

This paper presents a modelling framework for the Incremental Risk Charge (IRC) and Comprehensive Risk Measure (CRM) as the new capital requirements for market risks in a bank’s trading book ("Basel 2.5"). Both are Value-at-Risk-type measures projecting losses over a one-year capital horizon...