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Stress tests of capital requirements



Publishing details

IFA Working Paper

Authors / Editors

Dimson E;Marsh P R

Publication Year



This paper examines the performance of the leading methods for setting capital requirements for securities firms' trading books. Tests are conducted on a large sample of UK equity market makers' books over a substantial number of periods of equity market stress from 1985 to 1995. The comprehensive and building-block approaches, favoured by US and European regulators, fail to provide effective cover. Only portfolio-based, value-at-risk type models are efficient in providing appropriate levels of capital to cover the position risk of equity trading books.

Publication Research Centre

Institute of Finance and Accounting

Series Number

FIN 259


IFA Working Paper

Available on ECCH


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