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Backtesting: Performance of capital requirements for market risk in the BCRA
[Backtesting: Funcionamiento de los requisitos de capital por riesgo de mercado del BCRA]

Author

Listed:
  • Delfiner, Miguel
  • Balzarotti, Verónica
  • del Canto, Angel

Abstract

The Central Bank of Argentina (BCRA) introduced in September of 1996 a capital requirement for market risk. This requirement is calculated according to a standarized formulae set by the BCRA, based on a a Value-at-Risk (VaR) of tghe trading portfolio. This document studies the performance of the local methodology for establishing this requirement by means of a backtesting methodology applied to the trading portfolio of all local banks. According to our results, the standarized method established by the BCRA for fixing capital requirements for market risk understates the amount of capital needed to cover the risk.

Suggested Citation

  • Delfiner, Miguel & Balzarotti, Verónica & del Canto, Angel, 2001. "Backtesting: Performance of capital requirements for market risk in the BCRA [Backtesting: Funcionamiento de los requisitos de capital por riesgo de mercado del BCRA]," MPRA Paper 10231, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:10231
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    File URL: https://mpra.ub.uni-muenchen.de/10231/1/MPRA_paper_10231.pdf
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    More about this item

    Keywords

    Backtesting; regulatory capital;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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