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Bracing for the FRTB: Capital, business and operational impact
Journal of Securities Operations & Custody,
9
(2),
160-177
(2017)
Abstract
We give an overview of the impact of the new standard of minimum capital requirement for market risk, commonly referred to as the FRTB (Fundamental Review of the Trading Book). We do not attempt to reproduce many formulas or minute details, which can be found in the regulatory text. Instead, we try to give a pragmatic overview which connects the pieces together and informs the reader of the potential actions needed to be taken in light of this new framework in market risk. The FRTB is probably the biggest change in market risk for two decades and is an evolutionary force that requires adaptations by the industry in order for it to continue to thrive. A proactive approach is important and we hope to provide a healthy impetus by highlighting the key aspects of the framework that require attention.
Keywords: fundamental review, trading book, FRTB, market risk, regulatory capital
The full article is available to subscribers to the journal.
Author's Biography
Hany M. Farag is Senior Director and Head of Risk Methodology and Analytics at Canadian Imperial Bank of Commerce (CIBC). Prior to his current position he was a partner at Eastmoor Capital Partners, LLP; Managing Director and Head of FX Statistical Arbitrage at CIBC; and Head of Quantitative Research at OANDA Corporation. Prior to his industry positions he was a Postdoctoral Fellow at Caltech and at Rice University. He holds a PhD in Mathematical Analysis from Yale, a MS in Theoretical Physics from Yale and a BSc in Electronics and Communications Engineering from Ain Shams.
