Trading book and banking book

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trading book and banking book

RBC25 - Boundary between the banking book and the trading book

There is often confusion about the different nature of the Interest Rate Risk IRR in the banking book versus the trading book and what needs to be measured. The trading book refers to assets held by a bank that are available for sale and hence regularly traded. Banks are not required to mark these to market. They are usually held at historical cost. As such, this provides an opportunity for regulatory arbitrage. However, such a model is not capable of portraying the risks accurately and is not a good basis for holding capital. In IRRBB, the shift in interest rates is not necessarily the main driver of risk; unexpected customer behavior and the treatment of Non-Maturing Assets NMA can also have a significant influence on interest income.
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Published 09.01.2019

FRTB - Trading & Banking Book

This chapter sets out the instruments to be included in the trading book (which are subject to market risk capital requirements) and those to be included in the.

Trading book & banking book: Key modelling challenges

I am buying trading books to have more idea on stocks and the trading itself. Nothing to lose! Trading Books. Is my confusion.. I would like to know wether intraday spot deals done to hedge the NOP, but also generates profit, should be reported under the banking book or the trading book.

There is often confusion about the different nature of the Interest Rate Risk (IRR) in the banking book versus the trading book and what needs to be measured. The Value-at-Risk (VaR) for assets in the trading book is measured on a day time horizon under Basel II.
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The BIS hosts nine international organisations engaged in standard setting and the pursuit of financial stability through the Basel Process. A trading book consists of all instruments that meet the specifications for trading book instruments set out in RBC All other instruments must be included in the banking book.

In my current role, I look after important consulting engagements for a number of strategic clients cutting across various risk and regulatory issues. However, given my prior background I tend to specially focus on regulations in Market Risk and Stress Testing projects. The clients I work with range from large global banks with substantial multi-asset class exposures and sizeable trading portfolios, to more localized banks with limited trading exposure. Before I got into Risk, which as is the case for many of us, happened only post-crisis, I was involved on the derivatives trading support side of the business, managing projects in various areas including structuring, product control, and derivatives technology. We are looking forward to you presenting at the Risk EMEA Summit where you will be focusing on the trading book and banking book.

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