5.3 Market risks
5.3.1 Calculation of the Market risk charge
- L1-109. The market risk charge is calculated by aggregating, using the market risks correlation matrix specified in the Level 2 text, the following six sub-risk charges:
- • Interest Rate risk;
- • Non-Default Spread risk;
- • Equity risk;
- • Real Estate risk;
- • Currency risk; and
- • Asset Concentration risk.
- L1-110. When calculating the market risk charges, the following impacts are considered:
- • The direct impacts of the prescribed stress scenarios on the value of assets and liabilities; and
- • The indirect impacts linked to potential changes in policyholder behaviour following the prescribed stress scenarios.
- L1-111. For each of the six sub-risks, the risk charge is calculated both with and without the impact of management actions.
- L2-203. The correlation matrix used for aggregating the market risk charges is the following:
| Interest Rate | NDSR Up | NDSR Down | Equity | Real Estate | Currency | Asset Concentration | |
|---|---|---|---|---|---|---|---|
| Interest Rate | 100% | 25% | 25% | 25% | 25% | 25% | 0% |
| NDSR Up | 25% | 100% | 100% | 75% | 50% | 25% | 0% |
| NDSR Down | 25% | 100% | 100% | 0% | 0% | 25% | 0% |
| Equity | 25% | 75% | 0% | 100% | 50% | 25% | 0% |
| Real Estate | 25% | 50% | 0% | 50% | 100% | 25% | 0% |
| Currency | 25% | 25% | 25% | 25% | 25% | 100% | 0% |
| Asset Concentration | 0% | 0% | 0% | 0% | 0% | 0% | 100% |
〈 Table 16: Market risks correlation matrix 〉
5.3.2 Interest Rate risk5.3.3 Non-Default Spread risk5.3.4 Equity risk5.3.5 Real Estate risk5.3.6 Currency risk5.3.7 Asset Concentration risk
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