BASEL REFORMS

Under the FRTB Standardised Approach, the intra-bucket capital charge is the highest output from three prescribed correlation scenarios: Low, Medium, and High. This interactive guide isolates this calculation to demonstrate how the relationship between your positions—specifically whether they have the same or different signs—determines which scenario becomes the most punitive.

How a position's maturity directly impacts its capital treatment is a key rule in the FRTB Default Risk Charge (DRC) framework. To isolate this effect, we compare two portfolios where the only difference is the maturity of the long and short positions.

Navigating the FRTB Default Risk Charge. This guide breaks down the PRA's framework, from key concepts like JTD and LGD to the specific calculations for securitised and non-securitised products.

The FRTB framework introduces a curvature risk charge to capture the non-linear risks of options, requiring separate calculations for upward and downward shocks to account for both long and short gamma positions. Curvature correlations are uniquely determined by squaring the delta correlations, a conservative approach to modeling the interaction of these second-order risks. The framework also includes a crucial safeguard function to prevent under-capitalization by disallowing

This tool provides an interactive way to understand how market risk capital for equities works under the FRTB's Advanced Standardised Approach. It allows you to see how different portfolio positions can lead to vastly different capital requirements across the 13 prescribed 'buckets' for equity risk.

This article provides an explanation how delta correlation approach is implemented in vega calculations for CSR.

Under the PRA's Advanced Standardised Approach, Delta and Vega risk calculations share the same aggregation formulas but differ fundamentally in their inputs. While Delta uses a granular approach to measure sensitivity to price changes, the simpler Vega framework leverages the Delta correlations as a foundation to measure sensitivity to volatility.

An interactive guide to the buckets and risk weights under the Advanced Standardised Approach for CSR.

Under the FRTB's Advanced Standardised Approach, the capital calculation for Delta and Vega risks follows a precise standard aggregation formula. However, the regulation includes a provision for an "alternative calculation".

The primary challenge is to select the most capital-optimal bucket for a portfolio of commodity delta positions. The choice of bucket is the key driver of the final capital requirement.