The latest financial crisis has exposed substantial weaknesses in the bank risk models used by national regulators as well as the Basel Accords. The study is aimed at presenting the evolution and critique of risk measures and risk models in banking, with a special focus on the dynamically...

Regulatory capital for trading book positions includes two components that cover different risks but apply to the same portfolio, one for market risk and one for credit risk. Similar approaches are common in banks’ internal models for economic capital. Although it is known that joint market...