Version status: Inserted | Document consolidation status: Updated to reflect all known changes
Version date: 27 June 2019 - onwards
    Version 1 of 1    

Article 325bh Requirements on risk measurement

1. Institutions using an internal risk-measurement model that is used to calculate the own funds requirements for market risk as referred to in Article 325ba shall ensure that that model meets all the following requirements:

(a) the internal risk-measurement model shall capture a sufficient number of risk factors, which shall include at least the risk factors referred to in Subsection 1 of Section 3 of Chapter 1a unless the institution demonstrates to the competent authorities that the omission of those risk factors does not have a material impact on the results of the P&L attribution requirement referred to in Article 325bg; an institution shall be able to explain to the competent authorities why it has incorporated a risk factor in its pricing model but not in its internal risk-measurement model;

(b) the internal risk-measurement model shall capture nonlinearities for options and other products as well as correlation risk and basis risk;

(c) the internal risk-measurement model sh