Market Risk [30]

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Bullet points include: One way to capture liquidity effects better is to model risk over longer time horizons depending on how illiquid individual instruments are. E.g. assume liquid instruments assumed to be rolled frequently, whilst illiquid ones held through to final horizon. Basis of Incremental Risk Charge models required by Basel regulators. Position values simulated in multi-step ratings-based model up to horizon of 1 year. Liquid positions rolled over frequently into positions with same initial ratings, illiquid ones rolled over less

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