The Basel reform of market risk capital that moved from VaR to expected shortfall and tightened the line between trading and banking books. It also adds liquidity horizons.
Where you will meet it
Fundamental review of the trading book comes up in 4 learning outcome notes across the FRM syllabus.
A few of them:
Backtesting VaR FRM Part II · Market risk measurement and management
“The current framework, the FRTB internal models approach, uses expected shortfall for capital, so treat these zones as the legacy VaR regime.”
Fundamental Review of the Trading Book FRM Part II · Market risk measurement and management
“The Fundamental Review of the Trading Book (FRTB) replaces that patchwork.”
Fundamental Review of the Trading Book FRM Part II · Market risk measurement and management
“FRTB assigns each risk factor a liquidity horizon, the time needed to exit or hedge a position in stressed markets.”
Fundamental Review of the Trading Book FRM Part II · Market risk measurement and management
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