The Standardized Approach (SA) is here to stay. All banks subject to the Fundamental Review of Trading Book (FRTB) will now be required to use the Standardized Approach in some capacity, even if their trading desks utilize an Internal Model Approach (IMA). Desks using an IMA will still need to calculate the SA and compare the two—with the SA possibly providing a floor to the capital requirements in many cases. As such, the Sensitivity Based Approach (SBA) will be a critical component of FRTB reporting, and while many financial institutions are already prepared to conduct SBA calculations—many are not.
What does the SBA entail when it comes down to underlying methodology and risk sensitivity calculations for Delta, Curvature and Vega charges and what does its implementation mean from a business impact perspective?
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Paolo Tarpanelli, PhD, Senior Financial Engineer, Numerix
Paolo Tarpanelli works as a Senior Financial Engineer in Numerix’s Milan office, helping European clients price and manage the risk of their multi-asset class derivative portfolios. Prior to Numerix, Dr. Tarpanelli worked as Quantitative Pre-Sales Analyst at Thomson Reuters where he implemented pricing models for structured products and developed new tools for portfolio optimization techniques and high frequency trading. Before Thomson Reuters, he worked as a Quantitative Analyst in the Department of International Structured Products at Merrill Lynch. Dr. Tarpanelli holds an Economics degree in Quantitative Methods from the Universita degli Studi of Perugia, where he also received his PhD which focused on Risk Management in Commodity Markets.
Juan Vargas, Senior Financial Engineer, Numerix
Mr. Vargas joined Numerix in August 2014, where he is currently working as Senior Financial Engineer. He is focused on developing solutions for clients to price vanilla and exotic products as well as market risk and valuation adjustment measures using Numerix analytics. Before joining Numerix, Mr. Vargas worked as Quantitative Analyst in the valuation services team at Pricing Partners (now part of Thomson Reuters). Mr. Vargas holds a Master’s degree in Financial Engineering from Universite Paris Dauphine.
Complete the form below to download this complimentary white paper.