EBA Q&A 2020_5469: CCR2 + FRTB: Delta intra bucket correlation for the risk class “foreign exchange risk”

CCR2 + FRTB: Delta intra bucket correlation for the risk class “foreign exchange risk”

EBA Q&A 2020_5469 · Final Q&A

Question

How should the vega intrabucket correlation for the FX risk class be computed giving that the delta intra bucket correlation ρ_kl^ is not defined?

Answer

For the purposes of computing the vega intra-bucket correlation Pkl for the foreign exchange risk class in accordance with the formula in Article 325ay(2) of Regulation (EU) No 575/2013, the parameter ρ_kl^((DELTA)) should be set to 1, as there is only one delta risk factor per bucket for the foreign exchange risk class.