Version in force , Modified +19 −18§
Amended by Regulation (EU) 2021/424 32021R0424 on EUR-Lex (external, EUR-Lex)
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In paragraph 1, the symbol denoting the correlation parameter for vega risk sensitivities within the same GIRR bucket was changed from a plain 'rkl' notation to the formatted 'ρkl' symbol, with a period added before the formula.
Cited: Art. 325ay, v1 (external, EUR-Lex) · Art. 325ay, v2 (external, EUR-Lex)
v1 is the previous version, v2 this one.
Text from EUR-Lex, before and after
Previous version, in force 28 June 2021 02013R0575-20210629 → this version, in force 30 September 2021 02013R0575-20210930
Article 325ay
Vega and curvature risk correlations
1. Between vega risk sensitivities within the same bucket of the general interest rate risk (GIRR) class, the correlation parameter rkl ρkl shall be set as follows:ρklminρ follows:.ρklminρ kloption maturityρ klunderlying maturity;1
where:
ρkloption maturity shall be equal to eαTkTlminTk; Tl where α shall be set at 1 %, Tk and Tl shall be equal to the maturities of the options for which the vega sensitivities are derived, expressed as a number of years; and
ρklunderlying maturity is equal to eαTUkTUlminTUk; TUl, where α is set at 1 %, TUk and TUl shall be equal to the maturities of the underlyings of the options for which the vega sensitivities are derived, minus the maturities of the corresponding options, expressed in both cases as a number of years.
2. Between vega risk sensitivities within a bucket of the other risk classes, the correlation parameter ρkl shall be set as follows:ρklminρ klDELTAρ kloption maturity;1
where:
ρklDELTA shall be equal to the delta intra-bucket correlation corresponding to the bucket to which vega risk factors k and l would be allocated; and
ρkloption maturity shall be set in accordance with paragraph 1.
3. With regard to vega risk sensitivities between buckets within a risk class (GIRR and non-GIRR), the same correlation parameters for γbc, as specified for delta correlations for each risk class in Section 4, shall be used in the vega risk context.
4. There shall be no diversification or hedging benefit recognised in the standardised approach between vega risk factors and delta risk factors. Vega risk charges and delta risk charges shall be aggregated by simple summation.
5. The curvature risk correlations shall be the square of corresponding delta risk correlations ρkl and γbc referred to in Subsection 1.