MARKET RISK
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Risk Management (Elective) — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What is market risk in the context of banking?
Market risk is the risk of losses in on- and off-balance-sheet positions arising from adverse movements in market prices, including interest rates, equity prices, foreign exchange rates, and commodity prices.
What is the difference between systematic risk and unsystematic risk in market risk?
Systematic risk affects the whole market; unsystematic is firm-specific.
Which Basel framework introduced the standardised approach for market risk capital requirements?
The Basel III Fundamental Review of the Trading Book (FRTB), finalized in 2019, introduced the revised Standardised Approach (SA) and Internal Models Approach (IMA) for market risk capital requirements.
What is a risk factor in the context of market risk measurement?
A variable whose movement drives changes in portfolio value.
What does Value at Risk (VaR) measure in market risk management?
VaR measures the maximum potential loss in the value of a portfolio over a defined holding period for a given confidence interval, typically 99% over a 10-day horizon under Basel norms.
What is meant by the term 'Greeks' in options-based market risk management?
Sensitivity measures like delta, gamma, vega, theta, and rho.
What is the holding period prescribed by RBI for computing VaR for trading book positions?
RBI prescribes a minimum holding period of 10 trading days (two weeks) for computing VaR under the Internal Models Approach for market risk capital calculation.
What is Delta in the context of options risk management?
Rate of change of option price with respect to underlying asset price.
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