On the Basel Liquidity Formula for Elliptical Distributions
AbstractA justification of the Basel liquidity formula for risk capital in the trading book is given under the assumption that market risk-factor changes form a Gaussian white noise process over 10-day time steps and changes to P&L (profit-and-loss) are linear in the risk-factor changes. A generalization of the formula is derived under the more general assumption that risk-factor changes are multivariate elliptical. It is shown that the Basel formula tends to be conservative when the elliptical distributions are from the heavier-tailed generalized hyperbolic family. As a by-product of the analysis, a Fourier approach to calculating expected shortfall for general symmetric loss distributions is developed. View Full-Text
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Balter, J.; McNeil, A.J. On the Basel Liquidity Formula for Elliptical Distributions. Risks 2018, 6, 92.
Balter J, McNeil AJ. On the Basel Liquidity Formula for Elliptical Distributions. Risks. 2018; 6(3):92.Chicago/Turabian Style
Balter, Janine; McNeil, Alexander J. 2018. "On the Basel Liquidity Formula for Elliptical Distributions." Risks 6, no. 3: 92.
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