addOn

Calculate add-ons aggregated from all asset classes for each portfolio

Since R2024a

Syntax

outAddOnResults = addOn(saccrObject)

Description

outAddOnResults = addOn(saccrObject) computes add-ons aggregated from all asset classes for each portfolio using the saccr object. For more information, see Add-Ons.

You can use the aggregate function to aggregates add-ons over all asset classes with the outAddOnResults output. Also, you can use the addOnChart function to create a chart of portfolio add-on values.

Examples

Calculate Add-On Aggregate using saccr Object

Use a saccr object and the addOn function to calculate Add On aggregated from all asset classes for each portfolio.

Define the foreign exchange (FX) spot currency exchange rate table.

format("default");
Base = ["EUR";"GBP";"GBP"];
Quote = ["USD";"USD";"EUR"];
SpotRate = [1.0543;1.2195;1.1567];
FXSpotTable = table(Base,Quote,SpotRate)

FXSpotTable=3×3 table
    Base     Quote    SpotRate
    _____    _____    ________

    "EUR"    "USD"     1.0543 
    "GBP"    "USD"     1.2195 
    "GBP"    "EUR"     1.1567 

Define the SA-CCR CRIF file.

SACCRCRIF = "SACCR_CRIF_Ports_7_8_9.csv";

Create a saccr object using the data in the SA-CCR CRIF file.

mySACCR = saccr(SACCRCRIF, DomesticCurrency="USD", FXSpot=FXSpotTable)

mySACCR = 
  saccr with properties:

                         CRIF: [42×19 table]
                NumPortfolios: 3
                 PortfolioIDs: [3×1 string]
              CounterpartyIDs: [3×1 string]
                   Portfolios: [3×1 saccr.Portfolio]
                   Regulation: "Basel_CRE52"
             DomesticCurrency: "USD"
                        Alpha: [3×1 double]
                  FXSpotRates: [3×3 table]
          TradeDecompositions: [5×2 table]
           CollateralHaircuts: [200×6 table]
        SupervisoryParameters: [19×7 table]
    MaturityBusinessDaysFloor: 10
          NumBusinessDaysYear: 250

You can then use the addOn function with the saccr object. For more information, see Add-Ons.

outAddOnResults = addOn(mySACCR)

outAddOnResults = 
  AddOnResults with properties:

                        NumPortfolios: 3
                         PortfolioIDs: [3×1 string]
                      CounterpartyIDs: [3×1 string]
                           Regulation: "Basel_CRE52"
                     DomesticCurrency: "USD"
       AddOnAggregateUncollateralized: [3×1 double]
         AddOnAggregateCollateralized: [3×1 double]
    AddOnAssetClassesUncollateralized: [1×1 saccr.AddOnAssetClassResults]
      AddOnAssetClassesCollateralized: [1×1 saccr.AddOnAssetClassResults]

Input Arguments

saccrObject — SA-CCR object

object

SA-CCR object, specified as a saccr object. You create a saccr object using saccr.

Data Types: object

Output Arguments

outAddOnResults — Aggregated add-ons results

object

Aggregated add-ons results, returned as an AddOnResults object. The AddOnResults object has the following properties:

• NumPortfolios

• PortfolioIDs

• CounterpartyIDs

• Regulation

• DomesticCurrency

• AddOnAggregateUncollateralized

• AddOnAggregateCollateralized

• AddOnAssetClassesUncollateralized

  • The AddOnAssetClassesUncollateralized property has the following properties:

    • NumPortfolios

    • PorfolioIDs

    • CounterpartyIDs

    • Regulation

    • DomesticCurrency

    • AddOnInterestrate

    • AddOnForeignExchange

    • AddOnCredit

    • AddOnEquity

    • AddOnCommodity

• AddOnAssetClassesCollateralized

  • The AddOnAssetClassesCollateralized property has the following properties:

    • NumPortfolios

    • PorfolioIDs

    • CounterpartyIDs

    • Regulation

    • DomesticCurrency

    • AddOnInterestrate

    • AddOnForeignExchange

    • AddOnCredit

    • AddOnEquity

    • AddOnCommodity

You can use the aggregate function with the AddOnResults object.

More About

Add-Ons

The Add-ons are extra factors applied to the potential future exposure (PFE) of derivative contracts when calculating counterparty credit risk under the SA-CCR framework.

Add-ons in the SA-CCR framework capture specific risk characteristics of different derivative contracts:

• Credit risk add-on — Accounts for potential exposure increase due to the counterparty's credit risk, considering their creditworthiness.

• Interest-rate risk add-on — Captures potential exposure increase from interest rate movements, considering the contract's remaining maturity and underlying interest rate volatility.

• Equity risk add-on — Accounts for potential exposure increase from equity price movements, considering the equity derivative type and underlying equity volatility.

• Foreign exchange risk add-on — Captures potential exposure increase from foreign exchange rate movements, considering the foreign exchange derivative type and underlying currency volatility.

• Commodity risk add-on — Accounts for potential exposure increase from commodity price movements, considering the commodity derivative type and underlying commodity volatility.

Add-ons applied to the potential future exposure (PFE) of derivative contracts capture specific risk characteristics of each derivative type, reflecting potential exposure increase due to credit risk, interest rate risk, equity risk, foreign exchange risk, and commodity risk. Incorporating these add-ons in counterparty credit risk calculations under the SA-CCR framework provides a more accurate, risk-sensitive counterparty exposure measure, enabling appropriate capital allocation for potential losses.

References

[1] Bank for International Settlements. "CRE52 — Standardised Approach to Counterparty Credit Risk." June 2020. https://www.bis.org/basel_framework/chapter/CRE/52.htm.

[2] Bank for International Settlements. "CRE22 — Standardised Approach: Credit Risk Migration." November 2020. https://www.bis.org/basel_framework/chapter/CRE/22.htm.

[3] Bank for International Settlements. "Basel Committee on Banking Supervision: The Standardised Approach for Measuring Counterparty Credit Risk Exposures." April 2014. https://www.bis.org/publ/bcbs279.pdf.

Version History

Introduced in R2024a