Article 325r

Path:
Capital Requirements Regulation (CRR) > PART THREE > TITLE IV > CHAPTER 1a > Section 3 > Subsection 2 > Article 325r
Title:
Article 325r
Description: 
Delta risk sensitivities
Main content: 

1. Institutions shall calculate delta general interest rate risk (GIRR) sensitivities as follows:

(a) the sensitivities to risk factors consisting of risk-free rates shall be calculated as follows:
 

 where:

=

the sensitivities to risk factors consisting of risk-free rates;

rkt

=

the rate of a risk-free curve k with maturity t;

Vi (.)

=

the pricing function of instrument i; and

x,y

=

risk factors other than rkt in the pricing function Vi;


(b) the sensitivities to risk factors consisting of inflation risk and cross-currency basis shall be calculated as follows:
 

 where:

=

the sensitivities to risk factors consisting of inflation risk and cross-currency basis;

=

a vector of m components representing the implied inflation curve or the cross-currency basis curve for a given currency j with m being equal to the number of inflation or cross-currency related variables used in the pricing model of instrument i;

=

the unity matrix of dimension (1 × m);

Vi(.)

=

the pricing function of the instrument i; and

y, z

=

other variables in the pricing model.

 

2. Institutions shall calculate the delta credit spread risk sensitivities for all securitisation and non-securitisation positions as follows:

where:

=the delta credit spread risk sensitivities for all securitisation and non-securitisation positions;
cskt=the value of the credit spread rate of an issuer j at maturity t;
Vi (.)=the pricing function of instrument i; and
x,y=risk factors other than cskt in the pricing function Vi.


3. Institutions shall calculate delta equity risk sensitivities as follows:

(a) the sensitivities to risk factors consisting of equity spot prices shall be calculated as follows:
 

where:

sk

=

the sensitivities to risk factors consisting of equity spot prices;

k

=

a specific equity security;

EQk

=

the value of the spot price of that equity security;

Vi (.)

=

the pricing function of instrument i; and

x,y

=

risk factors other than EQk in the pricing function Vi;

 

(b) the sensitivities to risk factors consisting of equity repo rates shall be calculated as follows:
 

where:

=

the sensitivities to risk factors consisting of equity repo rates;

k

=

the index that denotes the equity;

=

 a vector of m components representing the repo term structure for a specific equity k with m being equal to the number of repo rates corresponding to different maturities used in the pricing model of instrument i;

=

the unity matrix of dimension (1 · m);

V(.)

=

the pricing function of the instrument i; and

x,y

=

risk factors other than   in the pricing function Vi.


4. Institutions shall calculate the delta commodity risk sensitivities to each risk factor k as follows:

where:

sk=the delta commodity risk sensitivities;
k=a given commodity risk factor;
CTYk=the value of risk factor k;
V(.)=the market value of instrument i as a function of risk factor k; and
y, z=risk factors other than CTYk in the pricing model of instrument i.

 

5. Institutions shall calculate the delta foreign exchange risk sensitivities to each foreign exchange risk factor k as follows:

where:

sk=the delta foreign exchange risk sensitivities;
k=a given foreign exchange risk factor;
FXk=the value of the risk factor;
V(.)=the market value of instrument i as a function of the risk factor k; and
y, z=risk factors other than FXk in the pricing model of instrument i.