Kleinknecht, Manuel and Ng, Wing Lon (2015) 'Minimizing Basel III Capital Requirements with Unconditional Coverage Constraint.' Intelligent Systems in Accounting, Finance and Management, 22 (4). pp. 263-281. ISSN 1055-615X
Full text not available from this repository.Abstract
The new Basel III framework increases the banks’ market risk capital requirements. In this paper, we introduce a new risk management approach based on the unconditional coverage test to minimize the regulatory capital requirements. Portfolios optimized with our new minimum capital constraint successfully reduce the Basel III market risk capital requirements. In general, portfolios with value-at-risk and conditional-value-at-risk objective functions and underlying empirical distribution yield better portfolio risk profiles and have lower capital requirements. For the optimization we use the threshold-accepting heuristic and the common trust-region search method.
Item Type: | Article |
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Uncontrolled Keywords: | Basel III capital requirements; heuristic portfolio optimization; threshold accepting; unconditional coverage |
Subjects: | H Social Sciences > HG Finance |
Divisions: | Faculty of Science and Health > Computer Science and Electronic Engineering, School of > Centre for Computational Finance and Economic Agents |
SWORD Depositor: | Elements |
Depositing User: | Elements |
Date Deposited: | 11 Jun 2015 11:29 |
Last Modified: | 06 Jan 2022 14:39 |
URI: | http://repository.essex.ac.uk/id/eprint/13910 |
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