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SS13/13 - Market risk1 Introduction2 Material deficiencies in risk capture by an institution’s internal approach3 Simplified standardised approach for options3A Sensitivity Models for Interest Rate Risk3B Calculation of the overall net foreign exchange position4 Netting a convertible with its underlying instrument5 Offsetting derivative instruments5A Corrections to modified duration for debt instruments under CRR Article 3406 Exclusion of overshootings when determining multiplication factor addends7 Derivation of notional positions for simplified standardised approaches8 Qualifying debt instruments9 Expectations relating to internal models10 Stressed VaR calculation11 Requirement to have an internal IRC model12 Annual SMF attestation of market risk internal models13 Alternative definitions of sensitivities in the advanced standardised approachAppendix - SS13/13 updates
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Version date: 12 December 2023 - onwards
Version 3 of 3

5A Corrections to modified duration for debt instruments under CRR Article 340

5A.1 The PRA expects firms making corrections to the calculation of modified duration for debt instruments, which are subject to prepayment risk under the second subparagraph of Article 340(3) of the Market Risk: Simplified Standardised Approach (CRR) Part, to apply one of the following:

(a) The formula set out in paragraph 5A.2

(b) The formula set out in paragraph 5A.3.

5A.2 For the purposes of paragraph 5A.1(a), firms should apply the following formula to correct the Modified Duration and compute a Corrected Modified Duration (CMD):

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