3. While the Stressed VaR model should share some of the current VaR standards, others may diverge …

While the Stressed VaR model should share some of the current VaR standards, others may diverge due to explicit Directive requirements or to methodological incompatibilities related to the Stressed VaR concept. In particular, this is the case in the following areas:

• (i) Length of the stressed Period

Given the length of the stressed period must be 12 months, any action to reduce or increase the stated stressed period based on the need for consistency between VaR and Stressed VaR should not be permitted.

• (ii) Back-testing requirement

The multiplication factor m s used for capital requirements should be at least 3 and be increased by an addend between 0 and 1 depending on the VaR backtesting results. Nevertheless, backtesting is not a requirement in itself for determining the Stressed VaR measure.

• (iii) Periodicity of the Stressed VaR calculation

As the CRD provides that the calculation of the Stressed VaR should be at least weekly, institutions may choose to compute the measure more frequently, for instance, daily, to coincide with the VaR periodicity.

If, for example, institutions decide on a weekly Stressed VaR computation, and assuming a one-day Stressed VaR scaled up to 10 days, for the daily calculation of capital requirements based on internal models the following would apply:

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• a) The same Stressed VaR number would be used for 5 subsequent business days following the running of the Stressed VaR model;
• b) With respect to the calculation of the average Stressed VaR numbers during the preceding sixty business days, institutions should use the previous 12 Stressed VaR numbers to compute that average;
• c) An institution should be able to prove that, on the day of the week chosen for Stressed VaR calculation, its portfolio is representative of the portfolio held during the week and that the chosen portfolio does not lead to a systematical underestimation of the Stressed VaR numbers when computed weekly. For example, proof that the VaR is not systematically lower on the day of the week chosen for Stressed VaR calculation could be considered sufficient.

1. Pregled

1.1 Reference

1.2 Utvrđeni zahtjevi

1.3 Povezani standardi

2. Utvrđeni zahtjevi

3. Povezani standardi

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