Delivering the FRTB Internal Model: Main Benefits and Challenges

The financial industry is preparing for the transition to the new regulation for market risk capital, Fundamental Review of the Trading Book (FRTB), upcoming in 2025. Luca Lamorte, an expert risk manager for Intesa SanPaolo, presents a brief summary of the main benefits and challenges that banks face in order to capitalize their trading desks according to the FRTB internal model approach (IMA). In particular, the validation tests at the individual desk level required by the FRTB are very challenging, which complicates the application of the IMA to the entire perimeter of the trading book. Luca analyzes these cases in detail, showing where MATLAB^® can be of great use in performing analyses and benchmarking of the new legislation.