Research finds ways to tame FRTB’s biases in forex charges

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Identical foreign exchange portfolios could attract wildly varying capital charges depending on which currency they are reported in under a new global market risk framework, but workarounds are possible, research shows.

The Fundamental Review of the Trading Book (FRTB), by the Basel Committee on Banking Supervision, introduces a revised standardised approach to calculating market risk. The approach dictates two charges for forex market risk – the linear charge and the curvature charge – calcula