Advanced Market Risk Management – FRTB Standardised Approaches

This advanced programme addresses the comprehensive implementation of the Fundamental Review of the Trading Book (FRTB) standardised approaches, with particular emphasis on the Sensitivities-Based Method (SbM) and Simplified Standardised Approach (SSA). Participants will develop practical expertise in trading book boundary determination, risk factor mapping, and capital calculation under the new market risk framework. The course addresses the significant changes in market risk capital requirements and provides strategic guidance for SME banks with trading operations.

Given that most SME banks will utilise standardised approaches rather than internal models, this programme focuses extensively on practical implementation challenges, including risk factor identification, delta-vega-curvature calculations, and the treatment of non-modellable risk factors. The course incorporates lessons learned from early FRTB implementations and addresses specific challenges faced by banks with smaller trading operations.

Participants will:

• Master the revised trading book boundary definitions and ongoing compliance requirements
• Implement Sensitivities-Based Method calculations across all risk classes
• Understand the Default Risk Charge and Residual Risk Add-on components
• Develop robust governance frameworks for trading book classification and management
• Navigate the interaction between FRTB and other regulatory frameworks
• Optimise trading strategies within FRTB capital constraints

• FRTB Framework and Implementation
  • Evolution from Basel 2.5 to FRTB: lessons from the financial crisis
  • Trading book boundary: presumptive lists and objective criteria
  • Governance requirements and ongoing boundary management
  • Systems and data architecture implications
• Sensitivities-Based Method (SbM)
  • Risk factor identification and mapping across seven risk classes
  • Delta risk calculations: sensitivities and correlation frameworks
  • Vega risk measurement and volatility surface management
  • Curvature risk: calculation methodologies and scaling factors
• Standardised Approach Components
  • Default Risk Charge: jump-to-default calculations
  • Residual Risk Add-on: identification and measurement
  • Non-modellable risk factors: treatment and capital implications
  • Simplified Standardised Approach for smaller portfolios
• Practical Implementation Challenges
  • Risk data architecture and systems requirements
  • P&L attribution testing and model validation
  • Business strategy implications and capital optimisation
  • Regulatory reporting and disclosure requirements
• Advanced Topics
  • Interaction with CVA and SA-CCR frameworks
  • Hedging strategies under FRTB constraints
  • Stress testing and scenario analysis
  • Future developments and regulatory evolution