FRTB Market Risk & Expected Shortfall Calculator
Model trading book capital requirements under the Fundamental Review of the Trading Book (FRTB), Sensitivities-Based Method (SBM), Default Risk Charge (DRC), and 97.5% Expected Shortfall.
Desk Sensitivities & Exposures
FRTB Capital & Risk Analytics
Standardized ApproachTrading Book Capital Profile
The portfolio exhibits standard multi-asset market risk under FRTB, with SBM driving the primary capital requirement and correlation diversification active.
| Capital Component | Charge ($M) | % of Capital | Methodology |
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Sensitivity Matrix: Interest Rate (GIRR) vs Credit Spread (CSR) Capital ($M)
Evaluates total FRTB market risk capital requirement under cross-asset interest rate and credit spread sensitivity swings.
FRTB & Market Risk Knowledge Check
Frequently Asked Questions
What is the Fundamental Review of the Trading Book (FRTB)?
The Fundamental Review of the Trading Book (FRTB), codified in BCBS 352 and BCBS 457, represents the comprehensive overhaul of Basel II.5 market risk capital rules. It replaces Value at Risk (VaR) with Expected Shortfall (ES) at a 97.5% confidence level, establishes a strict boundary between trading book and banking book, and introduces the Sensitivities-Based Method (SBM) under the Standardized Approach.
Why did FRTB replace 99% Value at Risk (VaR) with 97.5% Expected Shortfall (ES)?
Value at Risk (VaR) fails to measure tail risk beyond the confidence threshold and is not mathematically coherent because it violates the sub-additivity axiom (the risk of a combined portfolio can appear greater than the sum of its parts). Expected Shortfall (ES) measures the average loss in the worst 2.5% tail events, capturing extreme stress and fat-tail losses.
What are the core components of the FRTB Standardized Approach (SA)?
The FRTB Standardized Approach consists of three distinct capital charges: 1) Sensitivities-Based Method (SBM), aggregating Delta, Vega, and Curvature across GIRR, CSR, Equity, Commodity, and FX risk classes; 2) Default Risk Charge (DRC), covering jump-to-default risk; and 3) Residual Risk Add-On (RRAO), covering exotic and non-linear payoff structures.
How does Market Risk Capital convert into Risk-Weighted Assets (RWA)?
Under Basel capital standards, market risk capital requirement is converted into Risk-Weighted Assets (RWA) by multiplying total market risk capital by the reciprocal of the minimum 8% capital ratio, which equals exactly 12.5: Market Risk RWA = 12.5 * Total FRTB Capital Requirement.