• The contribution of credit spread variability $K_{spread}$ is defined as:

  $$K_{spread}^{unhedged}=\sqrt{{\left(\rho \cdot \sum _c{S}_c\right)}^2+\left(1-{\rho }^2\right)\cdot \sum _c{S}_c^2}$$

  $$S_c=\frac{R{W}_{b\left(c\right)}}{\alpha }\cdot \sum _{NS\in c}{M}_{NS}\cdot EA{D}_{NS}$$

  where

  • $S_c$ is the supervisory ES of CVA of counterparty $c$, where the summation is performed over all netting sets with the counterparty.
  • $\rho$ is the supervisory correlation between the credit spread of a counterparty and the systematic factor.
  • $\alpha$ is the multiplier used to convert EEPE to EAD (the default value is 1.4).
  • $b\left(c\right)$ is the supervisory risk bucket of counterparty $c$.
  • $R{W}_b$ is the supervisory weight for risk bucket $b$.
  • $EA{D}_{NS}$ is the EAD of netting set NS (which is calculated by SA-CCR).
  • $M_{NS}$ is the effective maturity for netting set NS, calculated as the weighted-average remaining maturity of the individual transactions.

Excel

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