Incremental Risk Charge: nuovi approcci computazionali

In the light of the current global financial crisis, the Basel Committee on Banking Supervision has released a third proposal concerning the introduction of the incremental risk model and its resultant regulatory capital charge. The purpose of this model is to capture the migration and default risk embedded in the credit products in the trading book of financial institutions, as the recent episodes of financial turmoil have proven banks to be undercapitalized, especially on those particular risks.The aim of this study is to provide an overview of the whole Incremental Risk Charge, placing greater emphasis on the computational challenge intrinsic in the construction of an incremental risk model. The content of the thesis is divided into three main sections, the first describes the regulatory pathway that has given life to the new capital requirement and the various methodologies in the literature. In the second part there is the implementation of the estimation model by the company Ors srl whose structure is based on CreditMetric Model. In the third are presented first two techniques aimed at finding an approximate closed solution to the combinatorial model preceding developed with the intent of reducing the computational complexity and timing , and finally describes the logic underlying the genetic algorithm implemented with the aim of simulating in a more efficient way, with respect to a Monte Carlo simulation type, the most significant events for the determination of the capital requirement.