Overview of BASEL III: changes in risk measurement approach for financial institutions

This article is reviewing the historical premises of the financial crisis that took place in 2007‒8, the reaction of the industry on it (in particular – Basel III framework defined by Basel Committee of Banking Supervision (BCBS)). A high-level analysis of the main changes to the risk assessment approach. Focus is put on the approaches for the market risk measurement, Standardized approach and Internal Model approach definitions are introduced. High level overview of Value at Risk and Expected shortfall methods shared. Various methods to calculate VaR/ES are introduced. Next steps of the ongoing research are defined to outline the overall expected result.