Estimation of capital requirements in the Iranian banking system To deal with market and credit risks

Each financial institution faces different types of risks, with three of the most important risks in the banking system being credit, market and operational risks. In order to manage risk, sufficient capital must be allocated. One of the common ways to calculate the capital needed to deal with these risks is to calculate the capital proportional to each risk and then the algebraic sum to obtain the total capital required. However, many recent studies of financial institutionschr('39') risk calculations have also considered the correlation between risks. Therefore, the purpose of this study is to compare the credit and market risk data, combine these two risks together and then calculate the capital requirement in the Iranian banking system to face two cumulative risks. In order to integrate these two types of risks with different statistical characteristics, the Copula function is used. Also, for each of the two risks, the associated risk factors are taken into account and their dynamics are modeled and used in the design of the desired model and to obtain the final distribution functions.