hard · Frm Part 2 Market Risk
A bank's internal model for market risk at the 99% confidence level records 7 exceptions over the last 250 business days.
Under the Basel 'traffic light' backtesting regime, what is the consequence for the bank's market risk capital multiplier (mc)?
- The multiplier increases from 3.00 to 3.65.
- The model is immediately revoked and the bank must use the Standardized Approach.
- The multiplier increases to 4.00.
- The model remains in the 'Green Zone' with no change to the multiplier.
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