TY  - JOUR
AB  - Since 1996, the Bank for International Setdements (BIS) has set the capital level that banks must hold against market risks by a specific formula. This article presents a practical approach for incorporating the effects of asset illiquidity and management response lags in setting regulatory capital levels to account for market risk. According to the BIS guidelines, capital should be a function of the effectiveness of limit management and market liquidity, because actively managing limits and positions can significantly reduce the risk of a trading operation. Although this approach represents an improvement over previous methods of setting capital, significant limitations still remain, namely, liquidity constraints and response lags in management intervention, which increase portfolio risk. The authors suggest specific amendments to the reg‐ulatory capital guidelines that may mitigate both of these limitations
VL  - 1
IS  - 4
SN  - 1526-5943
DO  - 10.1108/eb043455
UR  - https://doi.org/10.1108/eb043455
AU  - MARRISON CHRIS
AU  - SCHUERMANN TIL
AU  - STROUGHAIR JOHN D.
PY  - 2000
Y1  - 2000/01/01
TI  - Changing Regulatory Capital to Include Liquidity and Management Intervention
T2  - The Journal of Risk Finance
PB  - MCB UP Ltd
SP  - 47
EP  - 54
Y2  - 2024/09/25
ER  -