Journal of Banking & Finance Vol. 21 No. 11-12 1997
Stress tests of capital requirements
Abstract
This paper examines the performance of the leading methods for setting capital requirements for securities firms' trading books. Tests are conducted on a large sample of UK equity market makers' books over a substantial number of periods of equity market stress from 1985 to 1995. The comprehensive and building-block approaches, favoured by US and European regulators, fail to provide effective cover. Only portfolio-based, value-at-risk (VaR) type models are efficient in providing appropriate levels of capital to cover the position risk of equity trading books.
- DOI
- 10.1016/s0378-4266(97)00047-2
- Volume
- 21
- Issue
- 11-12
- Pages
- 1515-1546
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib