Regulatory & Risk Frameworks for Quants
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About this resource
Modern quant work is no longer just about pricing models. It is about how regulation, capital, risk frameworks, and model validation shape: which models desks are allowed to use how trades are structured what gets hedged what survives model approval and ultimately what makes money after capital costs.
Most candidates learn models in isolation. But interviews and desks test something different: Do you understand how Basel rules, FRTB, CVA, SA-CCR, and model validation change real trading decisions? This guide is built to close that gap. What this guide covers 1.
Regulatory foundations Why Basel III exists How crises changed model usage Regulatory objectives vs trading objectives Timeline: Basel I → II → III → FRTB → CVA capital → output floors 2. Market risk & FRTB (desk reality) VaR vs Expected Shortfall Liquidity horizons Risk factor eligibility test (RFET) Non-modellable risk factors (NMRF) Standardized vs Internal Models Approach Why exotic desks were shut post-2019 3.
Credit risk modeling PD / LGD / EAD Vasicek model intuition Retail vs corporate portfolios IRB vs standardized approach Why some products destroy capital efficiency 4. Counterparty risk & XVA capital CVA pricing vs CVA capital SA-CCR mechanics Exposure profiles explained visually Wrong-way risk Netting & collateral effects Why long-dated swaps are “capital toxic” 5.
Model validation (what actually gets checked) SR 11-7 expectations Benchmarking Sensitivity stability tests Backtesting traffic-light rules Documentation requirements Why neural networks fail approvals What breaks models in reviews 6. Capital-driven model choice Why simpler models often win Accuracy vs capital trade-off When traders downgrade models deliberately Capital-adjusted ROE logic 7.
Asset-class specific distortions Rates: FRTB vs Bermudan pricing FX: NMRF and proxy risk factors Equity: autocallables vs capital blow-ups Credit: tranche capital asymmetry 8. Stress testing & regulatory scenarios Macro stress construction Logistic PD models Capital depletion paths Supervisory stress vs internal stress 9.
What you get
- Instant digital delivery by email after purchase
- Written by a practising quantitative risk modeller
- Desk-focused material, not textbook theory
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