Article 383c
Interest rate risk factors
1.
The interest rate delta risk factors that are applicable to interest-rate sensitive instruments in the CVA portfolio shall be the risk-free rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.
The interest rate delta risk factors applicable to inflation-rate sensitive instruments in the CVA portfolio shall be the inflation rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.
2.
The currencies for which an institution shall apply the interest rate delta risk factors in accordance with paragraph 1 shall be euro, Swedish krona, Australian dollar, Canadian dollar, British pound sterling, Japanese yen and US dollar, the institution’s reporting currency and the currency of a Member State participating in ERM II.
3.
For currencies not specified in paragraph 2, the interest rate delta risk factors shall be the absolute change of the inflation rate and the parallel shift of the entire risk-free curve for a given currency.
4.
Institutions shall obtain the risk-free rates per currency from money market instruments held in their trading book that have the lowest credit risk, including overnight index swaps.
5.
Where institutions cannot apply the approach referred to in paragraph 4, the risk-free rates shall be based on one or more market-implied swap curves used by the institutions to mark positions to market, such as the interbank offered rate swap curves.
Where the data on market-implied swap curves described in the first subparagraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency.
6.
The interest rate vega risk factor applicable to instruments in the CVA portfolio sensitive to interest rate volatility shall be all the volatilities of the interest rate of all tenors for a given currency. The inflation rate vega risk factor applicable to instruments in the CVA portfolio sensitive to inflation rate volatility shall be all the volatilities of the inflation rate of all tenors for a given currency. There shall be one net interest rate sensitivity and one net inflation rate sensitivity computed for each currency.