Banks fear costs from loss of AAD under simpler FRTB rules
Trading book regime may force use of more expensive and time-consuming ways of computing risk sensitivities
The Basel Committee on Banking Supervision’s new market risk capital rules, which were unveiled in January, could prevent the use of adjoint algorithmic differentiation (AAD), a highly popular mathematical technique used by banks to speed up their risk calculations.
Similar to current rules, the Fundamental review of the trading book (FRTB) allows more sophisticated banks to use their own models for regulatory capital, albeit subject to tougher restrictions than existed before, including a
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