BASEL REFORMS

This guide provides a detailed walkthrough of the FRTB Advanced Standardised Approach (ASA) for calculating equity delta capital. Follow our step-by-step example to understand how sensitivities, risk weights, and correlations are used to determine the final own funds requirement under the PRA's framework.

This post provides a clear, step-by-step guide to calculating the market risk capital requirement for FX delta positions under the FRTB's Advanced Standardised Approach. We break down the complex regulatory formulas into a practical, easy-to-follow example, showing how to get from initial trade sensitivities to the final capital charge. This is a must-read for any risk professional navigating the new framework.

Calculating the GIRR Delta capital charge under FRTB's standardised approach is a sequential process. It begins by applying regulatory risk weights to interest rate sensitivities. These weighted sensitivities are then aggregated, first within each currency and then across all currencies, using a set of prescribed correlations. To ensure a conservative outcome, this entire aggregation is performed three times under Medium, High, and Low correlation scenarios, with the final ca