BASEL REFORMS

This guide provides a step-by-step calculation of the FRTB General Interest Rate Risk (GIRR) Curvature capital requirement. Following PRA rules, it takes a sample portfolio from gross positions to the final aggregated capital charge across three correlation scenarios.

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.