Institutions shall calculate the vega risk sensitivities of the aggregate CVA to risk factors consisting of implied volatility, as well as of an eligible hedge instrument to those risk factors, as follows:
S_{vol_k}^{CVA} = \frac{V_{CVA}(vol_k \cdot 1.01, x, y \dots) - V_{CVA}(vol_k, x, y \dots)}{0.01}
S_{\mathrm{vol}_k}^{\mathrm{hedge}_i} = \frac{V_i(\mathrm{vol}_k \cdot 1.01, w, z \dots) - V_i(\mathrm{vol}_k, w, z \dots)}{0.01}
where:
S_{\mathrm{vol}_k}^{\mathrm{CVA}} | = the sensitivities of the aggregate CVA to an implied volatility risk factor; |
vol_{k} | = the value of the implied volatility risk factor; |
VCVA | = the aggregate CVA calculated by the regulatory CVA model; |
x,y | = risk factors other than vol_{k} in the pricing function VCVA; |
S_{\mathrm{vol}_{k}}^{\mathrm{hedge}_{i}} | = the sensitivities of the eligible hedge instrument i to an implied volatility risk factor; |
Vi | = the pricing function of the eligible hedge i; |
w,z | = risk factors other than vol_{k} in the pricing function Vi. |