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ERM frameworks [14]

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Bullet points include: Calculated using either: Standard formulae, or Internal models. Value-at-Risk (VaR) based, so need: Holding period (10 days), Confidence level (1%). Risk model might indicate that portfolio will incur a loss of £X or more with a probability of 1% by the end of the 10-day holding period. VaR model idea not new – introduced in 1996 amendment to Basel I and implemented in Europe in Capital Adequacy Directive II (CAD II) in 1998

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