White paper
FRTB P&L attribution, an alignment problem
For heads of market risk: the P&L attribution test decides internal-model approval, desk by desk. Why it is an alignment problem between the risk model and the front office, and where live aggregation helps.
White paper, 6 pages, PDF. Sent on request, to a company email.
What it covers
- The P&L attribution test compares the risk engine's P&L with the front office's, desk by desk, on a rolling 250 trading days
- A red result costs the desk its internal model, amber brings a capital surcharge; the EU and the PRA have both made the test non-binding for a transition, a reason to align the two P&Ls now
- Passing it is an alignment problem: the same trades, market data and valuation adjustments in both P&Ls, with the risk model covering the factors that drive the desk
