Stressed VAR will hit forex options, dealers warn
Certain forex options and exotics penalised by Basel 2.5, including emerging market currencies and double no-touches
Basel trading book capital rules are having a punitive impact on certain foreign exchange options and may push up the cost of more exotic trades – particularly in emerging market currencies, dealers say.
The root of the issue is the regulatory capital charge for stressed value-at-risk, introduced for many banks as part of the Basel 2.5 package of reforms at the beginning of the year.
“There should be a market impact from stressed VAR, and it will start filtering through as more and more people
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