This Economic Letter reviews the Basel Capital Accord's stated principles on interest rate risk. In brief, the principles strongly support the idea that banks' internal risk assessments should, whenever possible, form the basis for supervisory oversight of their interest rate risk profiles. The...

We find that covariance matrix forecasts for an international interest rate portfolio generated by a model that incorporates interest-rate level volatility effects perform best with respect to statistical loss functions. However, within a value-at-risk (VaR) framework, the relative performance...

The asymptotic single risk factor (ASRF) approach is a simplified framework for determining regulatory capital charges for credit risk and has become an integral part of how credit risk capital requirements are to be determined under the second Basel Accord. Within this approach, a key...