IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Market Risk for Foreign Currency Options: Basle's Simplified Model

  • Nancy White Huckins
  • Anoop Rai
Registered author(s):

    We show that capital charges for foreign currency options estimated using a standardized model proposed by the Basle Committee on Banking Supervison are not consistently related to value at risk (VAR). We propose a simplified incremental model (SIM) and a simplified value at risk (SVAR) model and compare them to an internal model based on J.P. Morgan's RiskMetricsTM. We conclude that it is possible to construct a standardized model that is as effective as an internal model, especially for small portfolios. Since inaccurate forecasting under internal models is now subject to penalties, some banks may prefer standardized models.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Article provided by Financial Management Association in its journal Financial Management.

    Volume (Year): 28 (1999)
    Issue (Month): 1 (Spring)
    Pages:

    as
    in new window

    Handle: RePEc:fma:fmanag:huckins99
    Contact details of provider: Postal: University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620
    Phone: 813-974-2084
    Fax: 813-974-3318
    Web page: http://www.fma.org/

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:fma:fmanag:huckins99. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Courtney Connors)

    The email address of this maintainer does not seem to be valid anymore. Please ask Courtney Connors to update the entry or send us the correct address

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.