Range of Practices Study Notes covers the following learning objectives:
Within the economic capital implementation framework, describe challenges that appear in:
Defining and calculating risk measures
Risk aggregation
Validation of models
Dependency modeling in credit risk
Evaluating counterparty credit risk
Assessing interest rate risk in the banking book
Describe the BIS recommendations that supervisors should consider to make effective use of internal risk measures, such as economic capital, not designed for regulatory purposes.
Explain benefits and impacts of using an economic capital framework within the following areas:
Credit portfolio management
Risk based pricing
Customer profitability analysis
Management incentives.
Describe best practices and assess key concerns for the governance of an economic capital framework.
After reviewing the notes you will be able to apply what you learned with practice questions.
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