Nematrian
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Measuring and managing market, credit and Op risk [42]

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Bullet points include: Regulators worry that Trading book capital moved around too much in advance of crisis Firms erroneously believed themselves to be in a benign period in the run up to the 2007-09 credit crisis Trading book capital formula now (in some cases): I.e. sum of max of today’s VaR and a constant times average VaR over last 60 days, PLUS same calculation BASED ON STRESSED INPUTS Multipliers are minimum of 3 but may be adjusted up (see earlier slides on back testing)

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