Version in force , Inserted +1,923 −0§
Amended by Regulation (EU) 2019/876 32019R0876 on EUR-Lex (external, EUR-Lex)
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Explanation, written by a model and checked against the cited text
This new provision sets out how correlation parameters between sensitivities within the same commodity risk bucket are to be calculated, combining separate factors for commodity identity, tenor, and delivery location basis.
It also sets out a table of fixed intra-bucket correlation values for eleven named commodity buckets, and specifies particular treatment for electricity risk factors in bucket 3 and freight risk factors in bucket 4 depending on generation region, delivery period, route, or week of delivery.
Cited: Art. 325at, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex
Inserted in this version 02013R0575-20190627
Article 325at Intra-bucket correlations for commodity risk 1. For the purposes of this Article, any two commodities shall be considered distinct commodities where there exist in the market two contracts that are differentiated only by the underlying commodity to be delivered against each contract. 2. The correlation parameter ρkl between two sensitivities WSk and WSl within the same bucket shall be set as follows: ρkl = ρkl(commodity) · ρkl(tenor) · ρkl(basis) where: ρkl(commodity) shall be equal to 1 where the two commodities of sensitivities k and l are identical, otherwise it shall be equal to the intra-bucket correlations in Table 10; ρkl(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 99 %; and ρkl(basis) shall be equal to 1 where the two sensitivities are identical in the delivery location of a commodity, otherwise it shall be equal to 99,90 %. 3. The intra-bucket correlations ρkl(commodity) are: Table 10 Bucket number Bucket name Correlation ρkl (commodity) 1 Energy - solid combustibles 55 % 2 Energy - liquid combustibles 95 % 3 Energy - electricity and carbon trading 40 % 4 Freight 80 % 5 Metals – non-precious 60 % 6 Gaseous combustibles 65 % 7 Precious metals (including gold) 55 % 8 Grains and oilseed 45 % 9 Livestock and dairy 15 % 10 Softs and other agricultural commodities 40 % 11 Other commodity 15 % 4. Notwithstanding paragraph 1, the following provisions apply: (a) two risk factors that are allocated to bucket 3 in Table 10 and that concern electricity which is generated in different regions or is delivered at different periods under the contractual agreement shall be considered distinct commodity risk factors; (b) two risk factors that are allocated to bucket 4 in Table 10 and that concern freight where the freight route or week of delivery differ shall be considered distinct commodity risk factors.