3. For the purposes of paragraph 1, point (c), competent authorities shall, on a sample of risk factors for which data in the last 12-month period have been proxied:
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(a)
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require the institution to provide the time series of the proxied risk factors as used in the internal risk-measurement model and the time series of the corresponding pricing factors as used in the end-of-day valuation process;
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(b)
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verify that the volatilities of the two time series referred to in point (a) do not substantially diverge;
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(c)
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verify that the two time series are highly correlated.
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When applying that assessment method, competent authorities shall choose a sample of risk factors reflecting a variety of proxy approaches, including, where used, factor models, beta approximations, and mapping of risk factors to benchmarks, including names representative of a given sector and region or indices.