6. The model should capture divergences arising from differences in credit event definition …

The model should capture divergences arising from differences in credit event definition, seniority in the capital structure or exposure to different entities within a group. This could, for example, be implemented through the use of stochastic recovery rates. Defaulted bonds are in principle included in the IRC portfolio if they are in the trading book (cf. Paragraph 4.5). Therefore, the model should capture the risk that post-default LGD marks or realisations may diverge from their pre-default estimates. The initial LGD or recovery rate applied to individual defaulted positions would have to be updated with the same frequency for the IRC as for the P&L calculation and the LGDs must be in line with the numbers used for the P&L calculation.

1. Ħarsa ġenerali

1.1 Referenzi

1.2 Rekwiżiti identifikati

1.3 Standards relatati

2. Rekwiżiti identifikati

3. Standards relatati

• EBA -

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