The capitalization of the correlation trading portfolio (CTP) under the Fundamental Review of the Trading Book will have an adverse economic impact for users of these instruments. In particular, there is a lack of clarity and consistency in the application of the look-through approach under the sensitivities-based method and the default risk charge.
This paper sets out the industry position on best practice as it is applied to the current regulation. It also makes recommendations for improvements that would help to clarify regulatory requirements for the CTP to ensure alignment with how banks manage the risk of such products and support a globally consistent approach to the CTP to maintain liquidity in this important market.
Click on the attached PDF to read the full report.
Documents (1) for The Impact of the FRTB on Correlation Trading
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