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Market Risk Measurement in the Context of Basel IV Regulations

Author

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  • Onder BUBERKOKU

Abstract

In this study, against the background of the Basel IV regulations expected to come into force in January 2023, the market risks that may arise from stock markets and foreign exchange markets are measured using the filtered historical simulation method and extreme value theory. The results are then compared with those found under Basel III regulations. Additionally, all the analyses are conducted separately by considering both downside (long position) and upside (short position) market risks. The findings indicate that for both long and short trading positions, the market risk levels calculated under Basel IV regulations are higher than those calculated under Basel III regulations in all cases for all ten financial variables. This means that Basel IV regulations may increase Turkish banks’ capital requirements compared with Basel III regulations to offset the market risk arising from stock markets and foreign exchange markets.

Suggested Citation

  • Onder BUBERKOKU, 2023. "Market Risk Measurement in the Context of Basel IV Regulations," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 17(1), pages 1-38.
    • Handle: RePEc:bdd:journl:v:17:y:2023:i:1:p:1-38
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    File URL: https://www.bddk.org.tr/Content/docs/bddkDergiTr/dergi_0033_03.pdf
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    More about this item

    Keywords

    Basel IV Regulations; Market Risk Measurement; Foreign Exchange Markets; Stock Markets. Journal: Journal of BRSA Banking and Financial Markets;
    All these keywords.

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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