The use of internal Bank models for meeting capital requirements has been approved for some time. Regulators then face issues of model approval necessitating some public domain analysis of model performance. This paper presents a new approach to risk model evaluation using forward looking risk neutral probabilities. In addition to V aR and CV aR we analyse a new measure termed here RWAV aR that...

Basel III is a recently-agreed regulatory standard for bank capital adequacy with focus on the macroprudential dimension of banking regulation, i.e., the system-wide implications of banks’ lending and risk. An important Basel III provision is to reduce procyclicality of present banking regulation and promote countercyclical capital buffers for banks. The Eurace agent-based macroeconomic model a...

Steven Morrison Steven [email protected] A common definition of an insurer’s economic capital requirements is based around a 1-year Value at Risk (VaR) metric. This defines capital requirements in terms of some tail percentile (typically the 99.5th percentile) of the market-consistent value of the insurer’s balance sheet in 1 year’s time. The problem of estimating such a metric naturally le...