Sensitivities-Based Method: Definition of Delta Risk Buckets, Risk Weights and Correlations

For aggregating delta FX risk positions across buckets, the correlation parameter Y bc is uniformly set to 60%. 22 Specified currencies by the Basel Committee are: EUR, USD, GBP, AUD, JPY, SEK, CAD as well as the domestic reporting currency of a bank. 23 The delta GIRR correlation parameters ( ρ kl ) set out in Table 2 is determined by ma , where Tk (respectivelyTl) is the tenor that relates to W Sk (respectively W Sl); and θ is set at 3%. For example, the correlation between a sensitivity to the one-year tenor of the Eonia swap curve and the a sensitivity to the five-year tenor of the Eonia swap curve in the same currency is max = 88.69% 24 For example, the correlation between a sensitivity to the one-year tenor of the Eonia swap curve and a sensitivity to the five-year tenor of the three-month Euribor swap curve in the same currency is (88.69%) . (0.999) = 88.60%. 25 Covered bonds must meet the definition provided by Large Exposure Rules for Banks issued via SAMA circular No. 1651 / 67 dated 09/01/1441 . 26 Credit quality is not a differentiating consideration for this bucket. 27 For covered bonds that are rated AA- or higher, the applicable risk weight may at the discretion of the bank be 1.5%.. 28 For example, a sensitivity to the five-year Apple bond curve and a sensitivity to the 10- year Google CDS curve would be 35% . .65% . 99.90% = 22.73%. 29 Credit quality is not a differentiating consideration for this bucket. 30 Market capitalisation or economy (ie advanced or emerging market) is not a differentiating consideration for this bucket. 31 For example, the correlation between the sensitivity to Brent, one-year tenor, for delivery in Le Havre and the sensitivity to WTI, five-year tenor, for delivery in Oklahoma is 95% - 99.00% - 99.90% = 93.96%. 32 Specified currency pairs are: SAR/USD, USD/EUR, USD/JPY, USD/GBP, USD/AUD, USD/CAD, USD/CHF, USD/MXN, USD/CNY, USD/NZD, USD/RUB, USD/HKD, USD/SGD, USD/TRY, USD/KRW, USD/SEK, USD/ZAR, USD/INR, USD/NOK, USD/BRL. 33 example, EUR/AUD is not among the selected currency pairs specified by the Basel Committee, but is a first-order cross of USD/EUR and USD/AUD.