VaR-based measure.

CFR · 2024-01-01 · US · Title 12

(a) (1) The national bank's or Federal savings association's internal models for calculating its VaR-based measure must use risk factors sufficient to measure the market risk inherent in all covered positions. The market risk (2) The VaR-based measure may incorporate empirical correlations within and across risk categories, provided the national bank or Federal savings association validates and demonstrates the reasonableness of its process for measuring correlations. If the VaR-based measure does not incorporate empirical correlations across risk categories, the national bank or Federal savings association must add the separate measures from its internal models used to calculate the VaR-based measure for the appropriate market risk categories (interest rate risk, credit spread risk, equity price risk, foreign exchange rate risk, and/or commodity price risk) to determine its aggregate VaR-based measure. (3) The VaR-based measure must include the risks arising from the nonlinear price characteristics of options positions or positions with embedded optionality and the sensitivity of the fair value of the positions to changes in the volatility of the underlying rates, prices, or other material risk factors. A national bank or Federal savings association with a large or complex options portfolio must measure the volatility of options positions or positions with embedded optionality by different maturities and/or strike prices, where material. (4) The national bank or Federal savi

official document · source cfr-2024 · id 12:§ 3.205