Keywords: Value-at-risk, capital requirements, basel capital accord, market risk, risk management, G11, G18, G21, G28, G32.
The recent financial crisis has highlighted the criticality of the prudential supervision based on minimum capital requirements. Financial institutions do not seem to measure and manage risk in financial markets adequately. Criticism of the present model of Basel 2 have led the Committee to formulate a new regulatory proposal in July 2009 (Basel 3). This article aims to investigate models for estimating the market risk in the management of the portfolio of banks. The comparison between the models identifies a wide area between aggressive and conservative methods that management must choose from. The capital requirement determined in accordance with Basel 2 does not encourage to use sophisticated models that could better estimate the current risk of financial markets. The Basel Committee's new proposal involves an increase of capital requirements and reduces the incentive to use models with more predictive ability for regulatory purposes, promoting their application for management purposes.