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        1. Capital/FRTB
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        FRTB Basic Approach for CVA (BA-CVA, BCBS 325)

        • Slides
        • Excel
        Slides
        • Introduction
        • Basic CVA capital charge
        • Contribution of credit spread variability - 1 of 2
        • Contribution of credit spread variability - 2 of 2
        • Supervisory risk weights
        • Correlation
        • Basic CVA - pros and cons
        1. Slides

        Contribution of credit spread variability - 2 of 2

        • In the most general case, when both direct and indirect single-name CDS as well as index hedges are present, Kspread is calculated according to:

          Kspread = ρ ∑ cSc -∑ h∈crhcShSN -∑ iSiind2 + 1 - ρ2 ∑ cSc -∑ h∈crhcShSN2 + ∑ c∑ h∈c1 - rhc2ShSN2
          • ShSN = RWbhMhSNBhSN is the supervisory ES of price of single-name hedge h.
          • Shind = RWbiMiindBiind is the supervisory ES of price of index hedge i.
          • b(e) is the supervisory risk bucket of entity e (single-name or index).
          • BhSN is the discounted notional of single-name hedge h.
          • MhSN is the remaining maturity of single-name hedge h.
          • Biind is the discounted notional of index hedge i.
          • Miind is the remaining maturity of index hedge i.
          • rhc is the correlation between the credit spread of counterparty c and the credit spread of a single-name hedge h of counterparty c.
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