While the final FRTB text has some important changes from the fourth QIS of July 2015, including an extra year for implementation (with a new deadline of January 1st, 2019 for local translation and Dec 31st for latest date for 1st report submission by the financial institutions) and a reduced Residual Risk Add-on—many of the key rules in the framework remain unchanged from prior versions. Derivate market participants are finding the scope and complexity of the framework quite daunting.
What can be done to adequately prepare for FRTB implementation? Clearly, this is a highly complex question without simple answers. For simplification purposes, this paper breaks down the key implications, requirements and methodologies related to the FRTB ‘final’ text and implementation. First, the paper starts by addressing the increasing capital risk charges of considerable concern to today’s derivative market participants—as they continue to rethink derivative business strategy and impact on overall profitability. Next, our study explores the computational implications of FRTB and provides a comparison of the current framework vs. the FRTB framework for the Standardized Approach and Internal Model Approach.
As the paper unfolds, it provides a comprehensive breakdown of the Standardized Approach and Internal Model Approach, including detailed methodologies and prescribed formulas—highlighting overall computational and data challenges and the need for organizations to review, and potentially revamp, IT infrastructure in preparation.
Complete the form to the right to download this complimentary whitepaper, “Finalized,’ but Far from the Finish Line – Preparing for the Next Evolution of FRTB.”
Franck Rossi, Director of Product Management, Numerix LLC Franck Rossi is a Director of Product Management at Numerix, responsible for product strategy and thought leadership related to banking and derivatives regulations. He also works with clients to understand and document their requirements so Numerix can develop the required functionality into its software. Prior to joining Numerix, Mr. Rossi worked at Thomson Reuters in Product Management in Regulations, Analytics and Structured Products, and at HSBC in Interest Rate Structured Products. He holds an MSc in Finance and Mathematics from Paris-Dauphine University.
Complete the form below to download this complimentary white paper.
Thinking Derivatively – April 2024 Newsletter
White paper | Mastering XVA Dynamics from the Buy Side
White paper | Zero-Day Options: Unique Market Dynamics and Risk Considerations
Thinking Derivatively – March 2024 Newsletter
On-Demand Solution Webinar | Quants in the Cloud: Timely and Optimized Pricing and Risk Decisioning
White paper | Structured Credit: The Outlook for 2024
White paper | If More Convincing Is Needed, Here Are 4 Essential Reasons to Make More Use of the...
Thinking Derivatively – January/February 2024 Newsletter
On-Demand Solution Webinar | FINCAD Analytics Suite: Real-Time Pricing & Risk of 0DTE Options
Numerix Journal Vol. 9, No. 1
Coalition Greenwich - Managing Mortgage Market Risk Becomes More Complex
Risk.net On-Demand Webinar | Charting the Course for Structured Credit Markets in 2024