In attempting to promote international financial stability, the Basel Committee on Banking Supervision (2006) provided a framework that sought to control the amount of tail risk that large banks around the world would take in their trading books relative to their corresponding minimum capital...

Recognizing that many banks suffered trading losses that notably exceeded their minimum capital requirements during the recent crisis, the Basel Committee on Banking Supervision (2011) revised its regulatory framework for trading portfolios. In this paper, we compare: (1) the relative...