+TITLE VI OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK
---+Article 381 Meaning of credit valuation adjustment
---+Article 382 Scope
------+Article 382 1.
------+Article 382 2.
------+Article 382 3.
------+Article 382 4.
------+Article 382 4a.
------+Article 382 4b.
------+Article 382 4c.
------+Article 382 5.
------+Article 382 6.
---+Article 382a Approaches for calculating the own funds requirements for CVA risk
------+Article 382a 1.
------+Article 382a 2.
------+Article 382a 3.
------+Article 382a 4.
------+Article 382a 5.
---+Article 383 Standardised approach
------+Article 383 1.
------+Article 383 2.
------+Article 383 3.
---+Article 383a Regulatory CVA model
------+Article 383a 1.
------+Article 383a 2.
------+Article 383a 3.
------+Article 383a 4.
------+Article 383a 5.
---+Article 383b Own funds requirements for delta and vega risks
------+Article 383b 1.
------+Article 383b 2.
------+Article 383b 3.
------+Article 383b 4.
------+Article 383b 5.
------+Article 383b 6.
------+Article 383b 7.
------+Article 383b 8.
---+Article 383c Interest rate risk factors
------+Article 383c 1.
------+Article 383c 2.
------+Article 383c 3.
------+Article 383c 4.
------+Article 383c 5.
------+Article 383c 6.
---+Article 383d Foreign exchange risk factors
------+Article 383d 1.
------+Article 383d 2.
------+Article 383d 3.
---+Article 383e Counterparty credit spread risk factors
------+Article 383e 1.
------+Article 383e 2.
---+Article 383f Reference credit spread risk factors
------+Article 383f 1.
------+Article 383f 2.
---+Article 383g Equity risk factors
------+Article 383g 1.
------+Article 383g 2.
------+Article 383g 3.
---+Article 383h Commodity risk factors
------+Article 383h 1.
------+Article 383h 2.
------+Article 383h 3.
---+Article 383i Delta risk sensitivities
------+Article 383i 1.
------+Article 383i 2.
------+Article 383i 3.
------+Article 383i 4.
------+Article 383i 5.
------+Article 383i 6.
---+Article 383j Vega risk sensitivities
---+Article 383k Risk weights for interest rate risk
------+Article 383k 1.
------+Article 383k 2.
------+Article 383k 3.
------+Article 383k 4.
------+Article 383k 5.
---+Article 383l Intra-bucket correlations for interest rate risk
------+Article 383l 1.
------+Article 383l 2.
------+Article 383l 3.
---+Article 383m Correlation across buckets for interest rate risk
---+Article 383n Risk weights for foreign exchange risk
------+Article 383n 1.
------+Article 383n 2.
------+Article 383n 3.
------+Article 383n 4.
---+Article 383o Correlations for foreign exchange risk
------+Article 383o 1.
------+Article 383o 2.
---+Article 383p Risk weights for counterparty credit spread risk
------+Article 383p 1.
------+Article 383p 2.
------+Article 383p 3.
------+Article 383p 4.
---+Article 383q Intra-bucket correlations for counterparty credit spread risk
------+Article 383q 1.
------+Article 383q 2.
---+Article 383r Correlations across buckets for counterparty credit spread risk
---+Article 383s Risk weights for reference credit spread risk
------+Article 383s 1.
------+Article 383s 2.
------+Article 383s 3.
------+Article 383s 4.
------+Article 383s 5.
---+Article 383t Intra-bucket correlations for reference credit spread risk
------+Article 383t 1.
------+Article 383t 2.
---+Article 383u Correlations across buckets for reference credit spread risk
------+Article 383u 1.
------+Article 383u 2.
---+Article 383v Risk weight buckets for equity risk
------+Article 383v 1.
------+Article 383v 2.
------+Article 383v 3.
------+Article 383v 4.
------+Article 383v 5.
---+Article 383w Correlations across buckets for equity risk
---+Article 383x Risk weight buckets for commodity risk
------+Article 383x 1.
------+Article 383x 2.
---+Article 383z Correlations across buckets for commodity risk
------+Article 383z 1.
------+Article 383z 2.
---+Article 384 Basic approach
------+Article 384 1.
------+Article 384 2.
------+Article 384 3.
---+Article 385 Simplified approach
------+Article 385 1.
------+Article 385 2.
------+Article 385 3.
---+Article 386 Eligible hedges
------+Article 386 1.
------+Article 386 2.
------+Article 386 3.
------+Article 386 4.
------+Article 386 5.

TITLE VI OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK

TITLE VI OWN FUNDS REQUIREMENTS FOR CREDIT VALUATION ADJUSTMENT RISK

1. Overview

,
Article 381 Meaning of credit valuation adjustment

Article 381

Meaning of credit valuation adjustment

For the purposes of this Title and Chapter 6 of Title II, ‘credit valuation adjustment’ or ‘CVA’ means an adjustment to the mid-market valuation of the portfolio of transactions with a counterparty. That adjustment reflects the current market value of the credit risk of the counterparty to the institution, but does not reflect the current market value of the credit risk of the institution to the counterparty.

▼M17

For the purposes of this Title, ‘CVA risk’ means the risk of losses arising from changes in the value of CVA, calculated for the portfolio of transactions with a counterparty as set out in the first paragraph, due to movements in counterparty credit spread risk factors and in other risk factors embedded in the portfolio of transactions.

▼C2

Article 382 Scope
Article 382a Approaches for calculating the own funds requirements for CVA risk
Article 383 Standardised approach
Article 383a Regulatory CVA model
Article 383b Own funds requirements for delta and vega risks
Article 383c Interest rate risk factors
Article 383d Foreign exchange risk factors
Article 383e Counterparty credit spread risk factors
Article 383f Reference credit spread risk factors
Article 383g Equity risk factors
Article 383h Commodity risk factors
Article 383i Delta risk sensitivities
Article 383j Vega risk sensitivities

Article 383j

Vega risk sensitivities

Institutions shall calculate the vega risk sensitivities of the aggregate CVA to risk factors consisting of implied volatility, as well as of an eligible hedge instrument to those risk factors, as follows:

image

image

where:

image

= the sensitivities of the aggregate CVA to an implied volatility risk factor;

volk

= the value of the implied volatility risk factor;

VCVA

= the aggregate CVA calculated by the regulatory CVA model;

x,y

= risk factors other than volk in the pricing function VCVA ;

image

= the sensitivities of the eligible hedge instrument i to an implied volatility risk factor;

Vi

= the pricing function of the eligible hedge i;

w,z

= risk factors other than volk in the pricing function Vi .
Article 383k Risk weights for interest rate risk
Article 383l Intra-bucket correlations for interest rate risk
Article 383m Correlation across buckets for interest rate risk

Article 383m

Correlation across buckets for interest rate risk

The cross-bucket correlation parameter for interest rate delta and vega risks shall be set at 0,5 for all currency pairs.
Article 383n Risk weights for foreign exchange risk
Article 383o Correlations for foreign exchange risk
Article 383p Risk weights for counterparty credit spread risk
Article 383q Intra-bucket correlations for counterparty credit spread risk
Article 383r Correlations across buckets for counterparty credit spread risk

Article 383r

Correlations across buckets for counterparty credit spread risk

The cross-bucket correlations for counterparty credit spread delta risk shall be the following:



Table 1

Bucket

1, 2, 3, 13 and 14

4 and 15

5 and 16

6 and 17

7 and 18

8 and 19

9 and 10

11 and 20

12 and 21

1, 2, 3, 13 and 14

100 %

10 %

20 %

25 %

20 %

15 %

10 %

0 %

45 %

4 and 15

 

100 %

5 %

15 %

20 %

5 %

20 %

0 %

45 %

5 and 16

 

 

100 %

20 %

25 %

5 %

5 %

0 %

45 %

6 and 17

 

 

 

100 %

25 %

5 %

15 %

0 %

45 %

7 and 18

 

 

 

 

100 %

5 %

20 %

0 %

45 %

8 and 19

 

 

 

 

 

100 %

5 %

0 %

45 %

9 and 10

 

 

 

 

 

 

100 %

0 %

45 %

11 and 20

 

 

 

 

 

 

 

100 %

0 %

12 and 21

 

 

 

 

 

 

 

 

100 %
Article 383s Risk weights for reference credit spread risk
Article 383t Intra-bucket correlations for reference credit spread risk
Article 383u Correlations across buckets for reference credit spread risk
Article 383v Risk weight buckets for equity risk
Article 383w Correlations across buckets for equity risk

Article 383w

Correlations across buckets for equity risk

The cross-bucket correlation parameter for equity delta and vega risk shall be set at:

(a) 

15 %, where the two buckets fall within buckets 1 to 10 in Article 383v(1), Table 1;

(b) 

75 %, where the two buckets are buckets 12 and 13 in Article 383v(1), Table 1;

(c) 

45 %, where one of the buckets is bucket 12 or 13 in Article 383v(1), Table 1, and the other bucket falls within buckets 1 to 10 in Article 383v(1), Table 1;

(d) 

0 %, where one of the two buckets is bucket 11 in Article 383v(1), Table 1.
Article 383x Risk weight buckets for commodity risk
Article 383z Correlations across buckets for commodity risk
Article 384 Basic approach
Article 385 Simplified approach
Article 386 Eligible hedges

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards