• For each bucket, the aggregate weighted sensitivity $K_b$ is calculated according to the formula:

  $$K_b=\sqrt{\sum _{i=1}^{n}W{S}_i^2+\sum _{i=1}^n\sum _{j\ne i}^n{\rho }_{ij}W{S}_i^{}W{S}_j^{}}$$

  where $W{S}_i$ is the weighted sensitivity for risk factor $i$, and ${\rho }_{ij}$ is the correlation factor between $W{S}_i$ and $W{S}_j$.

• The weighted sensitivity $W{S}_i$ is calculated as:

  $$W{S}_i=R{W}_i^{}{s}_i^{}$$

  where $R{W}_i$ is the risk weight for factor $i$ and $s_i$ is the net sensitivity of factor $W{S}_i$.

Excel

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