Securitized assets

[LeeBrittain]

Hi David,

Do the FRM AIM's this year require us to know how the different versions of Basel deal with the risk weightings/methodologies (i.e. RBA)/etc. used for securitized assets? If so, are there any links/notes that describe how Basel deals with these assets? I'm pretty confused at the moment when questions come up regarding this.

Thanks,
Lee

 

[David Harper CFA FRM]

Hi Lee,

Yea, we could (should) do a better job here, I don't think we are helping with this currently. What GARP did, as of the 2010 AIMs, is "simplify" away from long list of detailed core Basel AIMs to the bullet-point type list (e.g., Describe and contrast the major elements of the three options available for the calculation of credit risk: Standardized Approach; Foundation IRB Approach; Advanced IRB Approach) which is basically wide-open and non-committal. Previously they had AIMs like "Discuss the Basel II Accord’s standardized and IRB treatments of asset securitization."

So, by going to the bullets, they've conveniently shifted away a burden, with respect to core Basel AIMs, to provide concrete pointers and, arguably, almost anything could be "in bounds" since it's a bullet point summary list of most of Basel's core elements.

Here is a post from when that securitization AIM was explicitly in the AIMs, maybe this gives a little help: http://www.bionicturtle.com/how-to/article/basel_ii_securitization

thanks,