Measuring and managing market, credit and Op risk [18]

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Bullet points include: Capital = Assets - Liabilities Capital may be defined by reference to book values (e.g. initial acquisition costs, or amortised cost) But more commonly nowadays market value based If financial institution holds (market-value) capital equal to VaR(alpha) where latter is calculated for holding period T then it should default on a fraction alpha of occasions over a horizon of T Ignoring any profits / losses and/or access to new capital in the meantime VaR vs TVaR partly about who bears losses beyond default, see Appendix A

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