Market Risk and FRTB Implementation

Overview

Introduction:

Market risk management and the Fundamental Review of the Trading Book (FRTB) represent a modern regulatory framework designed to strengthen the measurement, governance, and capital treatment of market risk within financial institutions. They integrate market risk measurement, trading book governance, capital adequacy, risk modeling, regulatory compliance, and model validation to improve the resilience and transparency of financial markets. This training program explores market risk management frameworks, FRTB standards, standardized and internal model approaches, risk measurement methodologies, capital calculation models, and governance practices aligned with international regulatory requirements. It provides an institutional perspective on how FRTB implementation enhances market risk oversight, strengthens regulatory compliance, improves capital efficiency, and supports sound risk governance across trading activities.

Program Objectives:

By the end of this program, participants will be able to:

  • Analyze the regulatory rationale and structural foundations of the FRTB framework.

  • Classify market risk factors and trading book exposures under FRTB standards.

  • Evaluate standardized and internal model approaches for market risk capital calculation.

  • Assess data governance and model validation structures required for FRTB compliance.

  • Explore the impact of FRTB implementation on capital management and trading strategy.

Target Audience:

• Market risk analysts and managers.

• Trading book risk and capital management specialists.

• Regulatory reporting and Basel framework professionals.

• Quantitative risk modeling teams.

• Internal audit and risk governance staff.

Program Outline:

Unit 1:

Foundations of Market Risk and FRTB Framework:

• Market risk definition within trading book environments.

• Regulatory background of the Fundamental Review of the Trading Book.

• Objectives of FRTB in capital adequacy reform.

• Scope of instruments and positions under FRTB coverage.

• Institutional implications for trading activities.

Unit 2:

Risk Factor Classification and Trading Book Structures:

• Risk factor taxonomy under FRTB standards.

• Trading book and banking book boundary definitions.

• Sensitivity based risk factor mapping logic.

• Treatment of curvature and default risk components.

• Position aggregation and portfolio structuring rules.

Unit 3:

Standardized and Internal Model Approaches:

• Structure of the standardized approach capital calculation.

• Risk charge components and aggregation logic.

• Internal model approach eligibility requirements.

• Expected shortfall modeling framework structure.

• Model approval and supervisory review positioning.

Unit 4:

Data Architecture and Model Governance for FRTB:

• Data sourcing and quality control frameworks.

• Risk factor modellability assessment structures.

• Non-modellable risk factor treatment logic.

• Model validation and backtesting governance systems.

• Documentation and regulatory reporting structures.

Unit 5:

Capital Impact and Institutional Implementation Strategy:

• Capital allocation and optimization frameworks under FRTB.

• Trading strategy adjustment considerations.

• Implementation roadmap and organizational coordination structures.

• Technology platform integration requirements.

• Long term market risk governance under FRTB.