The put premium gives the conditional expectation of loss beyond the worst case loss, if the worst case loss occurred. In more friendly language this means: Value at Risk (VaR) is a point estimate for the worst case loss. It is described at a given
The Holding Period Return represents the return earned by an instrument (e.g. an equity stock) over the time that it is held by an entity or alternatively over the period of analysis. A positive return indicates that the value of the instrument has grown in
The SAARC Finance policy response workshop on Basel II Enhancements SBP, NIBAF and SAARC Finance organized a two day workshop on Basel III implementations and Central Banks policy response to these changes in the SAARC region. Four external speakers were invited to present to a
Besides the two supervisory standards proposed in the Basel III liquidity reforms, the liquidity framework also presents 5 metrics that would be used by banks to monitor their liquidity position on a consistent basis. National supervisory authorities have the discretion of suggesting additional measures that
Basel III – NSFR In our previous posts we had addressed the Liquidity Coverage Ratio, the short term resilience liquidity standard to be introduced with the Basel III reforms. In this post we discuss the long term supervisory measure for assessing liquidity risk, the Net
In our previous post on the reforms being brought to the liquidity framework by Basel III we had discussed the numerator of the first minimum funding liquidity ratio, LCR. In this post we will cover the elements of the denominator of that ratio, i.e. the
In our previous post on the reforms being brought to the liquidity framework by Basel III we had discussed on a broad level the new minimum funding liquidity standards that would be applicable for the banking sector. In this post and the one to follow
According to the reforms to the capital and liquidity framework, Basel III would require the banking sector to maintain and monitor two key minimum funding liquidity standards as part of the supervisory/ regulatory approach to managing liquidity risk. This would be in addition to the
I recently ran a presentation for a client where I had to justify setting risk limits at a pre-defined threshold for a treasury and investment management function, linking Stop Loss, Value at Risk and Management Action Triggers. The question a very astute board member asked
Ever since we started preparing ICAAP (Internal Capital Adequacy Assessment Process) submission reports the two areas where clients had the most questions dealt with estimation of internal capital for strategic and liquidity risk. One client went as far as saying that I don’t want to