easy · FRM Part 2 Market Risk
The Basel 'Yellow Zone' (5 to 9 exceptions) represents a range where the regulator is uncertain if the model is correct. Statistically, this zone is designed to manage the trade-off between:
- Market risk and Credit risk.
- Parametric and Non-parametric estimations.
- Subadditivity and Translation Invariance.
- Type I and Type II errors.
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