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Stress Tests of Capital Requirements

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Preprint 01 Jan 1997Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

Authors: Elroy Dimson; Paul Marsh;

doi: 10.2139/ssrn.2219 , 10.1016/s0378-4266(97)00047-2

Stress Tests of Capital Requirements

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Abstract

This paper examines the performance of the leading methods for setting capital requirements for securities firms' trading books. Tests are conducted on a large sample of UK equity market makers' books over a substantial number of periods of equity market stress from 1985 to 1995. The comprehensive and building-block approaches, favored by US and European regulators, fail to provide effective cover. Only portfolio-based, value-at-risk type models are efficient in providing appropriate levels of capital to cover the position risk of equity trading books.

Related Organizations

University of Cambridge
United Kingdom
London Business School
United Kingdom
European Corporate Governance Institute
Belgium

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	citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	20
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	influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	Top 10%
	impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.	Top 10%