# How Does the Output Floor in FRTB Affect a Bank's Choice of Models? ▴ Question

**Published:** 2025-08-14
**Categories:** Question

---

![An exposed institutional digital asset derivatives engine reveals its market microstructure. The polished disc represents a liquidity pool for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-system.jpg)

![A translucent blue algorithmic execution module intersects beige cylindrical conduits, exposing precision market microstructure components. This institutional-grade system for digital asset derivatives enables high-fidelity execution of block trades and private quotation via an advanced RFQ protocol, ensuring optimal capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-core-execution-architecture-intelligence-layer.jpg)

## Concept

The Fundamental Review of the Trading Book (FRTB) introduces a systemic governor on risk modeling, fundamentally recalibrating the relationship between a bank’s internal intellectual property and regulatory-defined standardized measures. At the heart of this recalibration lies the output floor, a mechanism that establishes a lower boundary for a bank’s capital requirements. This floor dictates that the total risk-weighted assets (RWAs) calculated using a bank’s approved internal models ([Internal Model Approach](https://prime.greeks.live/question/what-are-the-primary-drivers-for-banks-choosing-the-standardised-approach-over-the-internal-model-approach/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), or IMA) cannot be less than 72.5% of the RWAs calculated using the regulator-prescribed [standardized approach](https://prime.greeks.live/question/how-does-the-internal-ratings-based-approach-to-capital-differ-from-the-standardized-approach-in-tiering-strategy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SA). The immediate effect is a hard-linking of the two methodologies, compelling a bank’s sophisticated, proprietary models to remain tethered to a common, universal benchmark.

This constraint was engineered to address the significant divergence in capital outcomes observed among banks using their own models for similar portfolios, a phenomenon that eroded confidence in the risk-based capital framework. The [output floor](https://prime.greeks.live/area/output-floor/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) functions as a credibility backstop, ensuring that the capital benefits derived from bespoke modeling are contained within a globally consistent range.

![A sleek, futuristic institutional grade platform with a translucent teal dome signifies a secure environment for private quotation and high-fidelity execution. A dark, reflective sphere represents an intelligence layer for algorithmic trading and price discovery within market microstructure, ensuring capital efficiency for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-execution-for-institutional-digital-asset-derivatives-1.jpg)

## The Inescapable Link between Internal and Standardized Frameworks

The output floor mechanism transforms the standardized approach from a fallback option for less sophisticated institutions into a perpetual, system-wide benchmark that every bank using [internal models](https://prime.greeks.live/question/how-should-a-firms-internal-capital-models-account-for-contingent-risks-from-multiple-ccp-memberships/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) must continuously calculate and reference. This creates a dual-track operational reality. A bank’s capital adequacy is no longer determined solely by the output of its own advanced models; it is now a function of the relationship between its internal view of risk and the regulator’s standardized view. This forces a profound strategic re-evaluation.

The intellectual and financial investment in developing and maintaining a highly nuanced [internal model](https://prime.greeks.live/question/can-a-firm-use-its-own-internal-model-for-initial-margin-calculation-instead-of-simm/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for a specific trading desk must now be justified against a backdrop where its ultimate capital impact is capped. The standardized approach, therefore, becomes a critical input into the strategic decision-making process for model selection, influencing resource allocation and the very architecture of a bank’s [risk management](https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) function. The two are no longer separate paths but intertwined components of a single capital equation.

> The output floor fundamentally alters a bank’s model strategy by making the standardized approach a permanent and binding constraint on the capital benefits of internal models.

This systemic linkage has deep implications for how banks perceive the value of their modeling capabilities. Where the pursuit of model sophistication was once a clear path to capital efficiency, the output floor introduces a point of diminishing returns. A model that is incrementally more accurate but produces a capital figure far below the 72.5% threshold offers no additional capital relief beyond that point.

This reality compels a shift in focus from pure model refinement to a more holistic optimization problem ▴ managing the complex interplay between the IMA, the SA, and the binding floor across all relevant [trading desks](https://prime.greeks.live/question/how-has-the-rise-of-systematic-internalisers-changed-the-role-of-traditional-sell-side-trading-desks/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and risk types. The operational challenge is to build a [risk architecture](https://prime.greeks.live/area/risk-architecture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that can not only run these parallel calculations efficiently but also provide the strategic insights needed to navigate the trade-offs inherent in this new regulatory landscape.

![A sleek, white, semi-spherical Principal's operational framework opens to precise internal FIX Protocol components. A luminous, reflective blue sphere embodies an institutional-grade digital asset derivative, symbolizing optimal price discovery and a robust liquidity pool](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-5.jpg)

## Restoring Credibility through Constraint

The introduction of the output floor is a direct response to the perceived “[model risk](https://prime.greeks.live/area/model-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” and excessive variability in [capital requirements](https://prime.greeks.live/area/capital-requirements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that characterized the pre-FRTB landscape. Regulators observed that different banks could arrive at vastly different capital figures for economically similar risk exposures, raising concerns about the consistency and comparability of capital ratios. This variability stemmed from the latitude banks had in designing and calibrating their internal models. By imposing a floor based on the standardized approach, regulators are establishing a common reference point intended to restore credibility and create a more level playing field.

The objective is to curtail the potential for regulatory arbitrage, where capital requirements could be minimized through model design choices rather than genuine differences in underlying risk. The floor acts as a guardrail, preventing internal model outputs from deviating too far from a conservative, standardized baseline.

This constraint-based approach to credibility has a profound effect on the internal culture of risk management. It forces a dialogue between the quantitative teams who build the models and the senior managers who oversee the bank’s capital strategy. The conversation shifts from “How low can our models take the [capital requirement](https://prime.greeks.live/question/can-a-clearing-member-actively-reduce-its-capital-requirement-for-default-fund-contributions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)?” to “What is the optimal modeling approach for each business line, considering the binding constraint of the output floor?” This change fosters a more robust and realistic assessment of risk, where the internal view is continuously benchmarked against a common, conservative standard.

The ultimate goal is to create a financial system where a bank’s reported capital ratio is a more reliable and comparable indicator of its resilience, thereby enhancing overall financial stability. The floor, in this sense, is a tool for enforcing a degree of modeling humility, ensuring that the complexities of financial risk are not underestimated in the pursuit of capital optimization.

![A sleek, spherical intelligence layer component with internal blue mechanics and a precision lens. It embodies a Principal's private quotation system, driving high-fidelity execution and price discovery for digital asset derivatives through RFQ protocols, optimizing market microstructure and minimizing latency](https://options.greeks.live/wp-content/uploads/2025/08/principals-private-quotation-system-intelligence-layer-component.jpg)

![A sophisticated institutional-grade system's internal mechanics. A central metallic wheel, symbolizing an algorithmic trading engine, sits above glossy surfaces with luminous data pathways and execution triggers](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-core.jpg)

## Strategy

The [FRTB](https://prime.greeks.live/area/frtb/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) output floor forces a fundamental pivot in a bank’s strategic calculus regarding its risk modeling architecture. The decision to pursue the Internal [Model Approach](https://prime.greeks.live/question/what-are-the-primary-drivers-for-banks-choosing-the-standardised-approach-over-the-internal-model-approach/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (IMA) is no longer a straightforward assessment of a model’s accuracy versus its cost. It becomes a complex optimization problem where the primary variable is the “headroom” between the capital calculated under the IMA and the 72.5% standardized approach (SA) floor. This headroom represents the tangible capital benefit of the internal model.

If this benefit is insufficient to justify the substantial operational and governance costs associated with the IMA, then defaulting to the standardized approach becomes a strategically sound decision. Consequently, banks must now perform a granular, desk-by-desk analysis to determine where the investment in bespoke modeling yields a meaningful return. A bank’s choice of models ceases to be a monolithic, firm-wide declaration of sophistication and instead becomes a mosaic of carefully considered, localized decisions.

![Modular institutional-grade execution system components reveal luminous green data pathways, symbolizing high-fidelity cross-asset connectivity. This depicts intricate market microstructure facilitating RFQ protocol integration for atomic settlement of digital asset derivatives within a Principal's operational framework, underpinned by a Prime RFQ intelligence layer](https://options.greeks.live/wp-content/uploads/2025/07/modular-high-fidelity-execution-architecture-for-institutional-digital-asset-derivatives-rfq-protocol-integration-and-principals-operational-framework-optimization.jpg)

## The Economic Tradeoff a Granular Cost-Benefit Analysis

The strategic core of the FRTB challenge lies in a rigorous cost-benefit analysis at the [trading desk](https://prime.greeks.live/area/trading-desk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) level. The costs associated with maintaining an IMA-compliant desk are significant and multifaceted. They extend beyond the initial development of the model to include the ongoing expenses of data sourcing and cleaning, the technological infrastructure for daily calculations, and the human capital required for model validation, backtesting, and governance. A particularly demanding component is the P&L attribution test, a daily requirement that seeks to align the risk model’s hypothetical P&L with the desk’s actual P&L. Failure of this test can result in the desk being forcibly reverted to the standardized approach, rendering the investment in the internal model moot. 

Against these substantial costs, the sole benefit of the IMA is the potential for a lower capital requirement. The output floor directly caps this benefit at a 27.5% reduction relative to the SA. A bank’s strategic task is to identify which trading desks have risk profiles that, when modeled internally, produce a capital figure comfortably below the 72.5% floor, creating enough of a capital reduction to generate a positive return on the high operational investment. For desks with complex, non-linear risks that are poorly captured by the SA, the IMA might still offer significant value.

Conversely, for desks holding simpler, more linear products, the capital relief offered by an internal model may be too marginal to justify the expense, especially when the SA calculation is already relatively efficient. This leads to a strategic sorting mechanism, where the IMA is reserved for the most complex and profitable trading activities where its precision provides a decisive capital advantage.

> A bank’s model strategy under FRTB evolves into a portfolio optimization exercise, allocating the high cost of internal models only to business units where the capital savings decisively outweigh the operational burdens.

The following table outlines the strategic factors a bank must weigh when deciding between the IMA and SA for a given trading desk:

### Table 1 ▴ Strategic Comparison of Internal Model Approach (IMA) vs. Standardized Approach (SA)

| Factor | Internal Model Approach (IMA) | Standardized Approach (SA) |
| --- | --- | --- |
| Capital Efficiency | Potentially lower capital requirements, but benefit is capped at 27.5% relative to the SA due to the output floor. | Generally higher, more conservative capital requirements. Becomes the baseline for the output floor calculation. |
| Risk Sensitivity | High. Models are tailored to the specific risk profile of the desk’s portfolio, capturing nuances and diversification benefits. | Low to moderate. Uses regulator-prescribed risk weights and formulas, which may not accurately reflect the portfolio’s true economic risk. |
| Operational Cost | Very high. Requires significant investment in technology, data infrastructure, and specialized quantitative talent for development, validation, and ongoing governance. | Low. Simpler to implement and maintain, with fewer data and system requirements. |
| Model Risk | High. Subject to the risk of model misspecification, implementation errors, and the stringent P&L attribution test, which can force a reversion to the SA. | Low. The methodology is prescribed by the regulator, eliminating model design risk for the bank. |
| Strategic Flexibility | Allows for more precise risk management and pricing, potentially enabling more sophisticated trading strategies. | May constrain certain business activities if the capital treatment is overly punitive for specific complex products. |

![Two abstract, polished components, diagonally split, reveal internal translucent blue-green fluid structures. This visually represents the Principal's Operational Framework for Institutional Grade Digital Asset Derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-execution-prime-os-liquidity-framework.jpg)

## Hybrid Strategies and the Rise of the “model Quilt”

The desk-level application of FRTB rules permits the emergence of hybrid strategies, where a bank constructs a “model quilt” stitched together from both IMA and SA components. An institution might choose to pursue the IMA for its most complex and profitable desks, such as those trading exotic derivatives or structured products, where the risk sensitivity of internal models can unlock significant capital savings. Simultaneously, it could opt for the simpler, less costly SA for desks with more vanilla, linear products, like government bond trading or simple FX forwards. This approach allows a bank to concentrate its investment in modeling expertise where it matters most, avoiding the expense of developing and maintaining sophisticated models for portfolios where the SA provides a reasonable and cost-effective capital outcome. 

This hybrid approach necessitates a sophisticated central governance framework. The bank must have a clear, documented methodology for deciding which approach to apply to each desk. This decision process would likely involve several key considerations:

- **Portfolio Complexity** ▴ Assessing whether the desk’s portfolio contains significant non-linearities, diversification benefits, or other risks that are inadequately captured by the standardized approach.

- **Business Criticality** ▴ Evaluating the profitability and strategic importance of the trading desk. High-margin businesses may be better able to justify the investment in IMA.

- **Data Availability** ▴ Determining if the desk has access to the long and granular time series of high-quality market data required to build and validate a robust internal model.

- **Existing Infrastructure** ▴ Considering the bank’s current technological and quantitative capabilities. A bank with a long history of advanced modeling may find it easier to adapt its existing systems to the new IMA requirements.

The ultimate strategy is one of surgical application. Instead of a firm-wide commitment to a single methodology, the bank of the future will possess a dynamic and flexible risk architecture, capable of deploying the right tool for the right job, continuously optimizing its capital and operational efficiency in a world defined by the output floor.

![Precision-engineered components of an institutional-grade system. The metallic teal housing and visible geared mechanism symbolize the core algorithmic execution engine for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-layer.jpg)

![A precision-engineered institutional digital asset derivatives execution system cutaway. The teal Prime RFQ casing reveals intricate market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-protocol-core-engine.jpg)

## Execution

Executing a [model strategy](https://prime.greeks.live/question/how-does-a-leakage-prediction-model-differ-from-a-standard-slippage-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in the presence of the FRTB output floor is an exercise in precise quantitative management and robust technological integration. It moves beyond strategic choices into the granular details of calculation, data management, and reporting. Banks must establish an operational framework capable of running dual capital calculations, comparing the outputs, and applying the floor rule accurately and efficiently on a daily basis.

This requires a significant uplift in technological capability, as the systems must not only handle the immense computational load of the new standardized and internal models but also provide clear, auditable data trails for regulatory scrutiny. The execution phase is where the strategic vision is translated into the operational reality of risk-weighted asset calculation, a process that is now fundamentally more complex and data-intensive.

![A cutaway reveals the intricate market microstructure of an institutional-grade platform. Internal components signify algorithmic trading logic, supporting high-fidelity execution via a streamlined RFQ protocol for aggregated inquiry and price discovery within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-for-digital-asset-derivatives-via-rfq-protocols.jpg)

## The Mechanics of the Floor Calculation a Practical Illustration

The core of the execution challenge is the daily calculation process. For every trading desk approved for the IMA, the bank must compute its capital requirement using its internal model. In parallel, it must calculate the capital requirement for the entire firm’s trading book using the new, more risk-sensitive standardized approach.

The output floor is then applied at the aggregate level, ensuring that the total RWA from the IMA is not less than 72.5% of the total RWA from the SA. This process is not a simple check; it is a full-scale, parallel calculation that demands significant computational resources.

To illustrate the tangible impact of the floor, consider a hypothetical bank with several trading desks. The following table demonstrates how the [final capital requirement](https://prime.greeks.live/question/can-a-clearing-member-actively-reduce-its-capital-requirement-for-default-fund-contributions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is determined. It shows the RWAs calculated under both the SA and IMA, the corresponding capital charges (assuming a hypothetical 10% capital ratio for simplicity), the calculation of the floor, and the final binding capital requirement.

### Table 2 ▴ Hypothetical Output Floor Calculation Across Trading Desks

| Trading Desk / Risk Area | RWA (Standardized Approach) | RWA (Internal Model Approach) | Capital @ 10% (SA) | Capital @ 10% (IMA) |
| --- | --- | --- | --- | --- |
| Rates Trading | $1,000M | $600M | $100M | $60M |
| Credit Trading | $1,500M | $900M | $150M | $90M |
| FX & Commodities | $800M | $400M | $80M | $40M |
| Equities Derivatives | $1,200M | $500M | $120M | $50M |
| Total | $4,500M | $2,400M | $450M | $240M |

In this illustration, the bank’s internal models produce a total capital requirement of $240M, a significant reduction from the $450M required by the standardized approach. However, the output floor sets a minimum capital level of $326.25M. The bank is therefore bound by the floor, and its final capital requirement is nearly 36% higher than what its own models deemed necessary. This demonstrates how the floor can neutralize a substantial portion of the capital benefits derived from a sophisticated IMA, fundamentally altering the economic incentives for model development.

![A sophisticated, multi-component system propels a sleek, teal-colored digital asset derivative trade. The complex internal structure represents a proprietary RFQ protocol engine with liquidity aggregation and price discovery mechanisms](https://options.greeks.live/wp-content/uploads/2025/07/principals-high-fidelity-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Operationalizing the Model Choice Framework

To execute a hybrid model strategy effectively, banks must establish a formal, repeatable process for evaluating and assigning the appropriate modeling approach to each trading desk. This is not a one-time decision but an ongoing governance process that must adapt to changes in market conditions, portfolio composition, and regulatory interpretations. The operational playbook for this process involves several distinct stages:

- **Initial Assessment and Triage** ▴ The first step is a comprehensive review of all trading desks. For each desk, the bank must perform an initial, high-level calculation of its capital requirements under both the new SA and a pro-forma IMA. This allows the bank to triage its desks into three broad categories:

<li>**Clear SA Candidates** ▴ Desks where the IMA provides minimal capital benefit, or where the operational complexity and cost of IMA are clearly prohibitive.

- **Clear IMA Candidates** ▴ Desks with highly complex portfolios where the IMA offers a substantial capital reduction, well in excess of the floor, justifying the investment.

- **Marginal Cases** ▴ Desks where the decision is not clear-cut, requiring a more detailed and nuanced analysis.

</li>
- **Deep-Dive Analysis for Marginal Cases** ▴ For desks in the third category, the bank must conduct a deep-dive analysis. This involves a more granular quantitative impact study, a thorough assessment of data availability and quality, and a detailed projection of the ongoing operational costs of maintaining an IMA. This stage also includes a qualitative assessment of the strategic importance of the desk and the potential business impacts of being constrained by the SA.

- **Implementation and Technology Build-Out** ▴ Once the decisions are made, the bank must execute the necessary technology and process changes. This involves configuring risk systems to run the chosen models, establishing data flows, and implementing the required governance and reporting routines. For IMA desks, this includes the setup of the P&L attribution test and other validation processes.

- **Ongoing Monitoring and Review** ▴ The model choice framework is not static. The bank must establish a process for regular review, at least annually, or more frequently if there are significant changes in a desk’s business or risk profile. This review process re-evaluates the cost-benefit analysis for each desk, ensuring that the chosen modeling approach remains optimal. This dynamic governance is essential to managing the “model quilt” effectively over time.

This structured, data-driven execution process is critical for navigating the complexities of the FRTB framework. It transforms the choice of models from a subjective decision into a rigorous, evidence-based discipline, aligning the bank’s risk architecture with its strategic and financial objectives in a capital-constrained world.

![Internal, precise metallic and transparent components are illuminated by a teal glow. This visual metaphor represents the sophisticated market microstructure and high-fidelity execution of RFQ protocols for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-microstructure-prime-os-intelligence-layer-atomic-settlement-precision.jpg)

## References

- Basel Committee on Banking Supervision. “Minimum capital requirements for market risk.” Bank for International Settlements, 2019.

- Basel Committee on Banking Supervision. “Basel III ▴ Finalising post-crisis reforms.” Bank for International Settlements, 2017.

- European Commission. “Banking package ▴ Questions and answers.” European Commission, 2024.

- Oprisor, Stefan, et al. “The bumpy road to FRTB.” McKinsey & Company, 2018.

- Choudhry, Moorad. The Principles of Banking. John Wiley & Sons, 2012.

- Hull, John C. Risk Management and Financial Institutions. John Wiley & Sons, 2018.

- Deloitte. “Fundamental Review of the Trading Book (FRTB) ▴ Navigating the new market risk capital framework.” Deloitte Insights, 2021.

- PricewaterhouseCoopers. “FRTB ▴ A new paradigm for market risk.” PwC Financial Services, 2020.

![A sleek pen hovers over a luminous circular structure with teal internal components, symbolizing precise RFQ initiation. This represents high-fidelity execution for institutional digital asset derivatives, optimizing market microstructure and achieving atomic settlement within a Prime RFQ liquidity pool](https://options.greeks.live/wp-content/uploads/2025/07/optimizing-digital-asset-derivatives-rfq-through-prime-os-precision.jpg)

## Reflection

![A precision internal mechanism for 'Institutional Digital Asset Derivatives' 'Prime RFQ'. White casing holds dark blue 'algorithmic trading' logic and a teal 'multi-leg spread' module](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-engine-high-fidelity-execution-liquidity-aggregation.jpg)

## The Mirror of Standardization

The implementation of the FRTB output floor does more than impose a new calculation on banks; it holds up a mirror. In that reflection, an institution can see the distance between its own internal assessment of risk and a globally harmonized, conservative benchmark. The size of that gap, and where it is most pronounced, offers a powerful diagnostic. It compels a fundamental inquiry into the philosophy underpinning a bank’s risk architecture.

Is the primary function of its models to achieve the most accurate possible understanding of economic risk, or is it to minimize [regulatory capital](https://prime.greeks.live/area/regulatory-capital/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) within a given set of rules? The output floor forces this question into the open, demanding an explicit and defensible strategy.

![A smooth, light-beige spherical module features a prominent black circular aperture with a vibrant blue internal glow. This represents a dedicated institutional grade sensor or intelligence layer for high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-intelligence-layer-for-optimal-digital-asset-rfq-execution.jpg)

## From Optimization to Systemic Resilience

Navigating this new landscape requires a shift in perspective. The pursuit of capital efficiency moves from a pure optimization of internal models to a more complex, systemic management of a dual framework. The institution’s ability to thrive will depend on the sophistication of its central nervous system ▴ the governance, technology, and analytical capabilities that allow it to manage the interplay between its bespoke models and the standardized floor.

The ultimate goal is the construction of a resilient and efficient operational framework, one that not only complies with the letter of the regulation but also internalizes its spirit. This involves building an architecture that is robust, flexible, and capable of providing the clarity needed to make sound strategic decisions in a world where the boundaries of model-driven advantage have been permanently redrawn.

![An intricate, transparent cylindrical system depicts a sophisticated RFQ protocol for digital asset derivatives. Internal glowing elements signify high-fidelity execution and algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-architecture.jpg)

## Glossary

<a href="https://prime.greeks.live/question/what-are-the-primary-drivers-for-banks-choosing-the-standardised-approach-over-the-internal-model-approach/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A polished, segmented metallic disk with internal structural elements and reflective surfaces. This visualizes a sophisticated RFQ protocol engine, representing the market microstructure of institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-1.jpg)

## Internal Model Approach

The shift to the Standardised Approach is driven by its operational simplicity and regulatory certainty in an era of rising model complexity and cost. </a><a href="https://prime.greeks.live/question/how-does-the-internal-ratings-based-approach-to-capital-differ-from-the-standardized-approach-in-tiering-strategy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate core of a Crypto Derivatives OS, showcasing precision platters symbolizing diverse liquidity pools and a high-fidelity execution arm. This depicts robust principal's operational framework for institutional digital asset derivatives, optimizing RFQ protocol processing and market microstructure for best execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-execution-system.jpg)

## Standardized Approach

The IRB approach uses a bank's own approved models for risk inputs, while the SA uses prescribed regulatory weights. </a><a href="https://prime.greeks.live/area/output-floor/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A robust circular Prime RFQ component with horizontal data channels, radiating a turquoise glow signifying price discovery. This institutional-grade RFQ system facilitates high-fidelity execution for digital asset derivatives, optimizing market microstructure and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Output Floor

Meaning ▴ The Output Floor defines a configurable lower bound or minimum acceptable threshold for a specific metric associated with automated order execution within institutional digital asset derivatives. </a><a href="https://prime.greeks.live/question/how-should-a-firms-internal-capital-models-account-for-contingent-risks-from-multiple-ccp-memberships/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Symmetrical, engineered system displays translucent blue internal mechanisms linking two large circular components. This represents an institutional-grade Prime RFQ for digital asset derivatives, enabling RFQ protocol execution, high-fidelity execution, price discovery, dark liquidity management, and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-prime-os-core.jpg)

## Internal Models

A firm's capital model must simulate the network of CCPs as a single system to quantify cascading contingent risks. </a><a href="https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Internal components of a Prime RFQ execution engine, with modular beige units, precise metallic mechanisms, and complex data wiring. This infrastructure supports high-fidelity execution for institutional digital asset derivatives, facilitating advanced RFQ protocols, optimal liquidity aggregation, multi-leg spread trading, and efficient price discovery](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-core-rfq-engine-for-institutional-digital-asset-options.jpg)

## Risk Management

Meaning ▴ Risk Management is the systematic process of identifying, assessing, and mitigating potential financial exposures and operational vulnerabilities within an institutional trading framework. </a><a href="https://prime.greeks.live/question/can-a-firm-use-its-own-internal-model-for-initial-margin-calculation-instead-of-simm/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Segmented beige and blue spheres, connected by a central shaft, expose intricate internal mechanisms. This represents institutional RFQ protocol dynamics, emphasizing price discovery, high-fidelity execution, and capital efficiency within digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimal-execution.jpg)

## Internal Model

A firm can use a proprietary internal model for initial margin if it secures explicit regulatory approval for its advanced, tailored system. </a><a href="https://prime.greeks.live/area/risk-architecture/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A cutaway view reveals an advanced RFQ protocol engine for institutional digital asset derivatives. Intricate coiled components represent algorithmic liquidity provision and portfolio margin calculations](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-digital-asset-derivatives-core-internal-mechanism-visualized.jpg)

## Risk Architecture

Meaning ▴ Risk Architecture refers to the integrated, systematic framework of policies, processes, and technological components designed to identify, measure, monitor, and mitigate financial and operational risks across an institutional trading environment. </a><a href="https://prime.greeks.live/question/how-has-the-rise-of-systematic-internalisers-changed-the-role-of-traditional-sell-side-trading-desks/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Interlocking transparent and opaque geometric planes on a dark surface. This abstract form visually articulates the intricate Market Microstructure of Institutional Digital Asset Derivatives, embodying High-Fidelity Execution through advanced RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/geometric-abstraction-of-institutional-digital-asset-derivatives-market-microstructure-driving-high-fidelity-execution-via-principal-rfq-protocols-and-optimal-liquidity-aggregation.jpg)

## Trading Desks

Systematic Internalisers re-architected sell-side desks from risk-taking intermediaries to quantitative risk managers of internalized flow. </a><a href="https://prime.greeks.live/area/capital-requirements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek metallic teal execution engine, representing a Crypto Derivatives OS, interfaces with a luminous pre-trade analytics display. This abstract view depicts institutional RFQ protocols enabling high-fidelity execution for multi-leg spreads, optimizing market microstructure and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-protocol-engine-for-high-fidelity-execution-and-market-microstructure-analysis.jpg)

## Capital Requirements

Meaning ▴ Capital Requirements denote the minimum amount of regulatory capital a financial institution must maintain to absorb potential losses arising from its operations, assets, and various exposures. </a><a href="https://prime.greeks.live/area/model-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Robust institutional Prime RFQ core connects to a precise RFQ protocol engine. Multi-leg spread execution blades propel a digital asset derivative target, optimizing price discovery](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-proto-insti-digital-asset-derivs-hi-fi-exec-capital-effi-risk-mgmt.jpg)

## Model Risk

Meaning ▴ Model Risk refers to the potential for financial loss, incorrect valuations, or suboptimal business decisions arising from the use of quantitative models. </a><a href="https://prime.greeks.live/question/can-a-clearing-member-actively-reduce-its-capital-requirement-for-default-fund-contributions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, futuristic mechanism showcases a large reflective blue dome with intricate internal gears, connected by precise metallic bars to a smaller sphere. This embodies an institutional-grade Crypto Derivatives OS, optimizing RFQ protocols for high-fidelity execution, managing liquidity pools, and enabling efficient price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-facilitating-high-fidelity-execution-and-optimal-market-microstructure-with-prime-os-intelligence.jpg)

## Capital Requirement

Yes, by systematically optimizing portfolio risk and strategically selecting clearing venues, a member directly reduces its default fund capital burden. </a><a href="https://prime.greeks.live/question/what-are-the-primary-drivers-for-banks-choosing-the-standardised-approach-over-the-internal-model-approach/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central processing core with intersecting, transparent structures revealing intricate internal components and blue data flows. This symbolizes an institutional digital asset derivatives platform's Prime RFQ, orchestrating high-fidelity execution, managing aggregated RFQ inquiries, and ensuring atomic settlement within dynamic market microstructure, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trading-system-facilitating-high-fidelity-rfq-protocol-optimization-for-best-execution-and-atomic-settlement.jpg)

## Model Approach

The shift to the Standardised Approach is driven by its operational simplicity and regulatory certainty in an era of rising model complexity and cost. </a><a href="https://prime.greeks.live/area/frtb/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, institutional-grade RFQ engine precisely interfaces with a dark blue sphere, symbolizing a deep latent liquidity pool for digital asset derivatives. This robust connection enables high-fidelity execution and price discovery for Bitcoin Options and multi-leg spread strategies](https://options.greeks.live/wp-content/uploads/2025/07/institutional-crypto-derivatives-rfq-engine-linking-deep-liquidity-pools.jpg)

## Frtb

Meaning ▴ FRTB, or the Fundamental Review of the Trading Book, constitutes a comprehensive set of regulatory standards established by the Basel Committee on Banking Supervision (BCBS) to revise the capital requirements for market risk. </a><a href="https://prime.greeks.live/area/trading-desk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An abstract composition of interlocking, precisely engineered metallic plates represents a sophisticated institutional trading infrastructure. Visible perforations within a central block symbolize optimized data conduits for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-multi-leg-execution-layer.jpg)

## Trading Desk

Meaning ▴ A Trading Desk represents a specialized operational system within an institutional financial entity, designed for the systematic execution, risk management, and strategic positioning of proprietary capital or client orders across various asset classes, with a particular focus on the complex and nascent digital asset derivatives landscape. </a><a href="https://prime.greeks.live/question/how-does-the-basel-iv-output-floor-change-a-banks-modeling-strategy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precise stack of multi-layered circular components visually representing a sophisticated Principal Digital Asset RFQ framework. Each distinct layer signifies a critical component within market microstructure for high-fidelity execution of institutional digital asset derivatives, embodying liquidity aggregation across dark pools, enabling private quotation and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/principal-digital-asset-rfq-protocol-layers-for-high-fidelity-execution.jpg)

## Floor Calculation

The Basel IV output floor fundamentally alters a bank's modeling strategy by making standardized approaches a binding constraint on capital. </a><a href="https://prime.greeks.live/question/how-does-a-leakage-prediction-model-differ-from-a-standard-slippage-model/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two distinct ovular components, beige and teal, slightly separated, reveal intricate internal gears. This visualizes an Institutional Digital Asset Derivatives engine, emphasizing automated RFQ execution, complex market microstructure, and high-fidelity execution within a Principal's Prime RFQ for optimal price discovery and block trade capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-automated-rfq-execution-microstructure-revealing-principal-prime-os-intelligence-layer-for-high-fidelity-execution-and-capital-efficiency.jpg)

## Model Strategy

A leakage model predicts information risk to proactively manage adverse selection; a slippage model measures the resulting financial impact post-trade. </a><a href="https://prime.greeks.live/question/can-a-clearing-member-actively-reduce-its-capital-requirement-for-default-fund-contributions/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract depiction of an institutional digital asset derivatives execution system. A central market microstructure wheel supports a Prime RFQ framework, revealing an algorithmic trading engine for high-fidelity execution of multi-leg spreads and block trades via advanced RFQ protocols, optimizing capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution-system-1.jpg)

## Final Capital Requirement

Yes, by systematically optimizing portfolio risk and strategically selecting clearing venues, a member directly reduces its default fund capital burden. </a><a href="https://prime.greeks.live/area/regulatory-capital/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![An opaque principal's operational framework half-sphere interfaces a translucent digital asset derivatives sphere, revealing implied volatility. This symbolizes high-fidelity execution via an RFQ protocol, enabling private quotation within the market microstructure and deep liquidity pool for a robust Crypto Derivatives OS](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-13.jpg)

## Regulatory Capital

Meaning ▴ Regulatory Capital represents the minimum amount of financial resources a regulated entity, such as a bank or brokerage, must hold to absorb potential losses from its operations and exposures, thereby safeguarding solvency and systemic stability. </a>

**Tags:** [P&L Attribution Test](https://options.greeks.live/area/pl-attribution-test/), [Output Floor](https://options.greeks.live/area/output-floor/), [Bank for International Settlements](https://options.greeks.live/area/bank-for-international-settlements/), [Risk Management](https://options.greeks.live/area/risk-management/), [Market Risk](https://options.greeks.live/area/market-risk/), [Banking Regulation](https://options.greeks.live/area/banking-regulation/)	

## Discover More

- 
### [What Are the Key Differences between Liquidity and Market Risk Stress Tests?](https://options.greeks.live/question/what-are-the-key-differences-between-liquidity-and-market-risk-stress-tests/)
![Sleek, dark grey mechanism, pivoted centrally, embodies an RFQ protocol engine for institutional digital asset derivatives. Diagonally intersecting planes of dark, beige, teal symbolize diverse liquidity pools and complex market microstructure. This highlights high-fidelity execution, price discovery, and atomic settlement via Prime RFQ for block trades.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-powering-high-fidelity-execution-for-multi-leg-spreads-portfolio-margin-and-atomic-settlement-via-prime-os-for-block-trades.jpg)

Market risk stress tests quantify portfolio value shocks; liquidity risk tests assess the ability to meet cash obligations.

- 
### [How Do Regulatory Capital Requirements Directly Impact a Dealer’s Quoting Behavior?](https://options.greeks.live/question/how-do-regulatory-capital-requirements-directly-impact-a-dealers-quoting-behavior/)
![A central teal and dark blue conduit intersects dynamic, speckled gray surfaces. This embodies institutional RFQ protocols for digital asset derivatives, ensuring high-fidelity execution across fragmented liquidity pools. It optimizes price discovery, atomic settlement, and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-3.jpg)

Regulatory capital requirements directly embed a risk-based funding cost into dealer pricing, governing quote size and spread.

- 
### [How Does the Instrument by Instrument Approach Differ from Previous Models?](https://options.greeks.live/question/how-does-the-instrument-by-instrument-approach-differ-from-previous-models/)
![A precisely engineered multi-component structure, split to reveal its granular core, symbolizes the complex market microstructure of institutional digital asset derivatives. This visual metaphor represents the unbundling of multi-leg spreads, facilitating transparent price discovery and high-fidelity execution via RFQ protocols within a Principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-protocols-revealing-market-microstructure-for-high-fidelity-execution-and-atomic-settlement-within-principals-operational-framework.jpg)

The instrument-by-instrument approach mandates a granular, bottom-up risk calculation, replacing portfolio-level models with a direct summation of individual position capital charges.

- 
### [How Do Regulatory Capital Requirements Directly Constrain a Dealer’s Market-Making Activities?](https://options.greeks.live/question/how-do-regulatory-capital-requirements-directly-constrain-a-dealers-market-making-activities/)
![Multi-faceted, reflective geometric form against dark void, symbolizing complex market microstructure of institutional digital asset derivatives. Sharp angles depict high-fidelity execution, price discovery via RFQ protocols, enabling liquidity aggregation for block trades, optimizing capital efficiency through a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-liquidity-aggregation-engine.jpg)

Regulatory capital acts as a direct pricing input, governing a dealer's capacity and willingness to absorb risk by taxing balance sheet usage.

- 
### [What Are the Regulatory Expectations for WWR Stress Testing under Basel III?](https://options.greeks.live/question/what-are-the-regulatory-expectations-for-wwr-stress-testing-under-basel-iii/)
![Sleek, off-white cylindrical module with a dark blue recessed oval interface. This represents a Principal's Prime RFQ gateway for institutional digital asset derivatives, facilitating private quotation protocol for block trade execution, ensuring high-fidelity price discovery and capital efficiency through low-latency liquidity aggregation.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-portal-optimal-institutional-digital-asset-execution.jpg)

Basel III requires firms to implement severe stress tests that dynamically model the correlation between counterparty default and exposure.

- 
### [How Does the Shift from Value-At-Risk to Expected Shortfall Impact Hedging Strategies for CVA?](https://options.greeks.live/question/how-does-the-shift-from-value-at-risk-to-expected-shortfall-impact-hedging-strategies-for-cva/)
![A gold-hued precision instrument with a dark, sharp interface engages a complex circuit board, symbolizing high-fidelity execution within institutional market microstructure. This visual metaphor represents a sophisticated RFQ protocol facilitating private quotation and atomic settlement for digital asset derivatives, optimizing capital efficiency and mitigating counterparty risk.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-grade-precision-execution-engine-optimizing-digital-asset-derivatives-rfq-protocols-within-market-microstructure.jpg)

The shift to Expected Shortfall compels CVA hedging to evolve from managing loss probability to controlling tail event severity.

- 
### [How Does SA-CCR Improve upon the Current Exposure Methodology?](https://options.greeks.live/question/how-does-sa-ccr-improve-upon-the-current-exposure-methodology/)
![Institutional-grade infrastructure supports a translucent circular interface, displaying real-time market microstructure for digital asset derivatives price discovery. Geometric forms symbolize precise RFQ protocol execution, enabling high-fidelity multi-leg spread trading, optimizing capital efficiency and mitigating systemic risk.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-request-for-quote-protocol-high-fidelity-execution-market-microstructure-intelligence-layer.jpg)

SA-CCR upgrades the prior method with a risk-sensitive system that rewards granular hedging and collateralization for capital efficiency.

- 
### [How Does the MiFID II SI Regime Impact a Bank’s Capital Allocation Strategy?](https://options.greeks.live/question/how-does-the-mifid-ii-si-regime-impact-a-banks-capital-allocation-strategy/)
![A precision digital token, subtly green with a '0' marker, meticulously engages a sleek, white institutional-grade platform. This symbolizes secure RFQ protocol initiation for high-fidelity execution of complex multi-leg spread strategies, optimizing portfolio margin and capital efficiency within a Principal's Crypto Derivatives OS.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-platform-secure-rfq-protocol-initiation-for-optimal-block-trade-execution.jpg)

The MiFID II SI regime transforms capital allocation into a strategic tool for designing a bank's market-making footprint.

- 
### [How Does a Unified Netting Framework Impact Regulatory Capital Calculations under Basel III?](https://options.greeks.live/question/how-does-a-unified-netting-framework-impact-regulatory-capital-calculations-under-basel-iii/)
![A sleek, multi-layered digital asset derivatives platform highlights a teal sphere, symbolizing a core liquidity pool or atomic settlement node. The perforated white interface represents an RFQ protocol's aggregated inquiry points for multi-leg spread execution, reflecting precise market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-core-execution-system.jpg)

A unified netting framework reduces true economic risk, but Basel III's siloed calculations inflate regulatory capital requirements.

---

## Raw Schema Data

```json
{
    "@context": "https://schema.org",
    "@type": "BreadcrumbList",
    "itemListElement": [
        {
            "@type": "ListItem",
            "position": 1,
            "name": "Home",
            "item": "https://options.greeks.live"
        },
        {
            "@type": "ListItem",
            "position": 2,
            "name": "Question",
            "item": "https://options.greeks.live/question/"
        },
        {
            "@type": "ListItem",
            "position": 3,
            "name": "How Does the Output Floor in FRTB Affect a Bank&#8217;s Choice of Models?",
            "item": "https://options.greeks.live/question/how-does-the-output-floor-in-frtb-affect-a-banks-choice-of-models/"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Organization",
    "@id": "https://greeks.live/#organization",
    "name": "Greeks.Live",
    "url": "https://greeks.live/",
    "description": "Greeks.live is the definitive toolkit for the professional options trader, dedicated to empowering our users with institutional-grade data, advanced analytics, and a comprehensive suite of trading tools designed to provide a decisive edge in the market. Every article and guide published under the Greeks.live name is a product of our deep commitment to data-driven analysis and our mission to support the global trading community.",
    "email": "support@greeks.live",
    "logo": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/Greeks.Live-Logo-Icon.svg"
    },
    "hasPart": [
        {
            "@type": "WebSite",
            "name": "About Us",
            "url": "https://about.greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "App Download Page",
            "url": "https://about.greeks.live/#/download/basic_trade"
        },
        {
            "@type": "WebSite",
            "name": "Newcomers' Guide",
            "url": "https://twisty-sign-c8b.notion.site/Guide-for-Greeks-live-X-Deribit-Newbies-5a08a3052822427d800af6eaf3704c8d"
        },
        {
            "@type": "WebSite",
            "name": "Knowledge Base",
            "url": "https://linktr.ee/greeks.live"
        },
        {
            "@type": "WebSite",
            "name": "Option Terminology",
            "url": "https://greekslive.notion.site/88dfc00e7c584d4d8969b6302a79a12f?pvs=4"
        },
        {
            "@type": "WebSite",
            "name": "Terms of Service",
            "url": "https://greeks.live/#/tos"
        },
        {
            "@type": "WebSite",
            "name": "Disclaimer",
            "url": "https://greeks.live/#/disclaimer"
        }
    ],
    "sameAs": [
        "https://x.com/greekslive",
        "https://youtube.com/@greeks_live?si=-KjT0Lkw4WUCI0tD",
        "https://t.me/greekslive_notifications",
        "https://t.me/greekslive",
        "https://pinterest.com/greekslive/"
    ],
    "makesOffer": [
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "RFQ Platform",
                "url": "https://rfq.greeks.live",
                "description": "Execute institutional-grade block trades for crypto options and futures. This platform provides deep, over-the-counter (OTC) liquidity via a professional Request for Quote system.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Lending Tools",
                "url": "https://lend.greeks.live",
                "description": "Manage crypto lending and borrowing activities to earn yield or secure loans. This suite of tools helps users analyze interest rates and manage collateralized debt positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Data Lab",
                "url": "https://greeks.live/#/deribit/tools/datalab/BTC",
                "description": "Analyze historical and real-time options data with advanced metrics. This tool is designed for backtesting strategies and identifying market trends through comprehensive data visualization.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Profit & Loss Analysis (PnL)",
                "url": "https://greeks.live/#/deribit/tools/pnl_analysis",
                "description": "Track and analyze the Profit and Loss (PnL) of your options portfolio. This tool provides detailed performance metrics to help traders evaluate and refine their strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Position Visualization",
                "url": "https://greeks.live/#/deribit/tools/pv/BTC",
                "description": "Visualize complex options positions and their corresponding risk profiles. This tool generates payoff diagrams to help traders intuitively understand potential profit, loss, and exposure.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Options Calculator",
                "url": "https://greeks.live/#/deribit/tools/calculator",
                "description": "Calculate the theoretical price and risk parameters ('the Greeks') of crypto options. An essential tool for pricing new trades and analyzing the sensitivity of existing positions.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live Main Platform",
                "url": "https://greeks.live/",
                "description": "The central hub for the Greeks.live suite of professional cryptocurrency options and derivatives trading tools. Access analytics, manage positions, and explore the ecosystem.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Community Forum",
                "url": "https://t.greeks.live",
                "description": "Join the official Greeks.live community. Connect with other traders, share insights, and receive the latest updates directly from the team.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for Deribit",
                "url": "http://deribit.greeks.live",
                "description": "A dedicated interface for trading on the Deribit exchange. This platform leverages Greeks.live's advanced analytics and tools specifically for users of Deribit's options and futures markets.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "Greeks.live for OKX",
                "url": "http://okx.greeks.live",
                "description": "A dedicated interface for trading on the OKX exchange. This platform integrates Greeks.live's powerful analytics with the OKX marketplace, focusing on its options and derivatives products.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "GLVS.AI Trading Platform",
                "url": "https://www.glvs.ai/",
                "description": "An AI-powered platform for automated crypto options trading. Leverage advanced algorithms and data-driven signals to develop and deploy sophisticated, hands-free trading strategies.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        },
        {
            "@type": "Offer",
            "itemOffered": {
                "@type": "Service",
                "name": "API Testnet & Sandbox",
                "url": "https://test.greeks.live",
                "description": "A dedicated testnet environment for developers to test their API integrations and automated trading strategies. This sandbox allows for full functionality testing without risking real funds.",
                "provider": {
                    "@id": "https://greeks.live/#organization"
                }
            }
        }
    ],
    "subOrganization": [
        {
            "@type": "Organization",
            "name": "GreeksLive HK Co., Limited",
            "email": "support@greeks.live",
            "telephone": "+852-56418949",
            "address": {
                "@type": "PostalAddress",
                "streetAddress": "Unit 11, 27/F, K. Wah Centre, 191 Java Road",
                "addressLocality": "Hong Kong",
                "addressRegion": "North Point",
                "addressCountry": "CN",
                "postalCode": "0000"
            },
            "geo": {
                "@type": "GeoCoordinates",
                "latitude": "22.2932357",
                "longitude": "114.2022026"
            },
            "image": "https://options.greeks.live/wp-content/uploads/2025/08/Wah-Centre-Hong-Kong.jpg"
        }
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "Article",
    "mainEntityOfPage": {
        "@type": "WebPage",
        "@id": "https://options.greeks.live/question/how-does-the-output-floor-in-frtb-affect-a-banks-choice-of-models/"
    },
    "headline": "How Does the Output Floor in FRTB Affect a Bank's Choice of Models? \u25b4 Question",
    "description": "The FRTB output floor constrains model choice by capping capital benefits, forcing a strategic cost-benefit analysis of internal models versus standardized approaches. \u25b4 Question",
    "url": "https://options.greeks.live/question/how-does-the-output-floor-in-frtb-affect-a-banks-choice-of-models/",
    "datePublished": "2025-08-14T11:45:45+00:00",
    "dateModified": "2025-08-14T11:45:46+00:00",
    "articleSection": [
        "Question"
    ],
    "author": {
        "@id": "https://greeks.live/#organization"
    },
    "publisher": {
        "@id": "https://greeks.live/#organization"
    },
    "image": {
        "@type": "ImageObject",
        "url": "https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-engine-for-institutional-digital-asset-derivatives-rfq.jpg",
        "caption": "A symmetrical, angular mechanism with illuminated internal components against a dark background, abstractly representing the intricate market microstructure of institutional digital asset derivatives. This visualizes precise algorithmic trading logic governing RFQ protocol operations, facilitating block trade execution and multi-leg spread construction. It underscores high-fidelity execution and the Principal's operational framework for managing counterparty risk, achieving best execution for Bitcoin options and Ethereum futures, ensuring capital efficiency and atomic settlement through a sophisticated Prime RFQ."
    },
    "keywords": [
        "Bank for International Settlements",
        "Banking Regulation",
        "Basel III",
        "Capital Requirements",
        "FRTB",
        "Hybrid Model Strategy",
        "Internal Model Approach (IMA)",
        "Market Risk",
        "Model Risk",
        "Output Floor",
        "P&amp;L Attribution Test",
        "Regulatory Capital",
        "Risk Architecture",
        "Risk Management",
        "Risk-Weighted Assets (RWA)",
        "Standardized Approach (SA)",
        "Trading Desk"
    ]
}
```

```json
{
    "@context": "https://schema.org",
    "@type": "WebSite",
    "url": "https://options.greeks.live/",
    "potentialAction": {
        "@type": "SearchAction",
        "target": "https://options.greeks.live/?s=search_term_string",
        "query-input": "required name=search_term_string"
    }
}
```


---

**Original URL:** https://options.greeks.live/question/how-does-the-output-floor-in-frtb-affect-a-banks-choice-of-models/
