Article 13
Computation of the losses
1. Institutions shall calculate the loss corresponding to a scenario of future shock applied to one or more non-modellable risk factors by calculating the loss on the portfolio of positions for which they calculate the own funds requirements for market risk in accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b, of Regulation (EU) No 575/2013, and that occurs if that scenario of future shock is applied to that non-modellable risk factor or those non-modellable risk factors in a standardised bucket, and all other risk factors remain unchanged.
2. Institutions shall calculate the loss corresponding to a scenario of future shock applied to one or more non-modellable risk factors by using the pricing methods used in the risk measurement model.
3. By way of derogation from paragraph 2, where institutions cannot calculate the loss for some financial instruments or commodities included in the portfolio referred to in paragraph 1, corresponding to a scenario of future shock applied to one or several non-modellable risk factors by using their pricing methods, they shall apply the following steps in the following order:
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(a) |
they shall identify those financial instruments or commodities and the cause of the failure of the pricing calculation; |
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(b) |
they shall use sensitivity-based pricing methods, including at least the material first order and material second order terms of Taylor series approximations, to reflect the change in the price of those financial instruments or commodities due to changes in the non-modellable risk factors in this scenario of future shock. |
4. By way of derogation from paragraph 2, institutions may, only for the purpose of determining the stress period in accordance with Article 12(1), calculate the loss corresponding to a scenario of future shock applied to one or more non-modellable risk factors using sensitivity-based pricing methods. Institutions shall demonstrate that the price changes that are not captured by the sensitivity-based pricing methods would not modify the stress period identified by the institution.