multiplier on specific risk

[shanlane]

Hello,

I read somewhere that there is a multiplier on specific risk. Is there any kind of a max function or multilpier that applies to specific risks (like market Var or stressed VaR)?

Thanks!

SHannon

 

[David Harper CFA FRM]

Hi Shannon,

I see where the handbook implies that, but unless I've missed a development, I'm just not aware of it. The latest interpretation, far as i can tell, includes two multipliers (http://www.bis.org/publ/bcbs208.htm), consistent with handbook equation 28.15: both the 60-day average VaR and Stressed VaR are multiplied by, respectively, k and k(S), which have floors of 3.0. Then the traffic light (zone red-yellow-green) backtest of VaR may ratchet those up from 3.0 to 4.0. I just don't see any other explicit multiplier on the specific charge, and I think clearly the IRC/IRM does not. Thanks,

 

[shanlane]

Thank you!

Shannon