4. Transition matrices, in general, relate to a one-year horizon. Where shorter horizon matrices …

Transition matrices, in general, relate to a one-year horizon. Where shorter horizon matrices are required, which is the case when liquidity horizons shorter than one year are used, the corresponding transition matrices cannot always be computed directly and approximations are required. Both the approximations and the motivation for specific assumptions applied in this process should be documented (e.g. when generator matrices are used). These assumptions should also be assessed in order to verify that they remain valid over time. As part of the validation process a matrix based on a generator could be calculated for a horizon identical to the originating matrix‟s horizon in order to assess the difference resulting from the process of developing the generator matrix.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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