The paper presents a consistent approach to the modeling of general and specific market risk as defined in regulatory documents. It compares the statistically based beta-factor model with a class of benchmark models that use a broadly based index as major building block for modeling. The...

We present an analysis of the VaR forecasts and the P&L series of all 12 German banks that used internal models for regulatory purposes throughout the period from the beginning of 2001 to the end of 2004. One task of a supervisor is to estimate the 'recalibration factor', i.e. by how much a bank...