• The residual risk add-on in FRTB is calculated for all instruments bearing “residual risk”, in addition to other components of the capital requirement under SA, according to the following formula:

  $$RRAO=\sum _i^{}Notiona{l}_i\cdot R{W}_i$$

  where $Notiona{l}_i$ is the notional amount of trade $i$, $R{W}_i$ is the risk weight: 1% for instruments with an exotic underlying, and 0.1% for instruments bearing other residual risks.

Excel

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