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
Latest
ISDA In Review – August 2026
A compendium of links to new documents, research papers, press releases and comment letters published by ISDA in August 2026.
Remove Bureaucracy from Cross-margin Approvals
Cross-margining programs play a critical role in financial markets. By ensuring margin requirements more closely reflect the actual risk of a portfolio of products, they reduce liquidity strain and improve market efficiency, both of which will become even more important...
Joint Response on CCP Resolution
On September 7, ISDA and FIA responded to a Bank of England (BOE) discussion paper on central counterparty (CCP) resolution. The associations support greater clarity on valuation capabilities prior to a crisis scenario and the boundary between recovery and resolution,...
Expanding Legal Agreement Coverage in the CDM
This paper examines the recent extension of the Common Domain Model (CDM)1 to represent two of the most significant, and previously undeveloped, areas of its legal agreement model: umbrella agreements and contract amendments. Umbrella agreements are widely used to document...