FRTB Standardised Approach for CVA (SA-CVA, BCBS 325)

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Sensitivity buckets - 3 of 3

In the formula for Kb, R is a hedging disallowance parameter, set at [0.01], that prevents the possibility of perfect hedging of CVA risk, and
$W S_{k} = W S_{k}^{C V A} + W S_{k}^{H d g}$

$W S_{k}^{C V A} = R W_{k} \cdot s_{k}^{C V A}$

$W S_{k}^{H d g} = R W_{k} \cdot s_{k}^{H d g}$
- $R W_{k}$ – risk weights applicable to each risk type specified in the table below.
- $s_{k}^{C V A}$ – sensitivity of the aggregate CVA to each risk factor k in the risk type. The sensitivities are defined as the ratio of change of the quantity in question caused by a small change of the risk factor current value to the change size.
- $s_{k}^{H d g}$ – sensitivity of all eligible hedges to each risk factor k in the risk type.
- $ρ_{k l}$ – correlation parameters applicable to each risk type.

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