Class FrtbNmrf

java.lang.Object
com.quantfinlib.risk.FrtbNmrf
public final class FrtbNmrf extends Object
Capital for non-modellable risk factors (NMRF) under the FRTB internal models approach, styled after BCBS d457 chapter MAR33. Not certified.

Plain idea. Each NMRF gets its own stress-scenario loss. Idiosyncratic credit-spread and idiosyncratic equity factors are each aggregated with zero correlation within its own group, under separate square roots; all remaining NMRFs are aggregated with a single correlation of 0.6, which sits between a plain sum and a root-sum-square.

Formal statement (per MAR33).

  SES = √(Σ ISES_credit,i²) + √(Σ ISES_equity,j²)
     + √((ρ Σ SES_k)² + (1 − ρ²) Σ SES_k²),   ρ = 0.6
(MAR33.17, d457). The separate roots for the credit (i = 1..L) and equity (j = 1..K) groups are verified against the printed formula in MAR33.17 (d457).

Worked example (own test): credit {3, 4}, equity {5}, others {10, 10}: √25 + √25 + √(144 + 0.64·200) = 5 + 5 + 16.4924 = 26.4924.

  • Field Summary

    Fields
    Modifier and Type
    Field
    Description
    static final double
    RHO
    Correlation for non-idiosyncratic NMRFs (MAR33.17(4), verified).

  • Method Summary

    Modifier and Type
    Method
    Description
    static double
    ses(double[] idioCredit, double[] idioEquity, double[] others)
    Aggregated stress-scenario capital.

    Methods inherited from class Object

    clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

  • Field Details

    • RHO

      public static final double RHO
      Correlation for non-idiosyncratic NMRFs (MAR33.17(4), verified).
      See Also:

  • Method Details

    • ses

      public static double ses(double[] idioCredit, double[] idioEquity, double[] others)
      Aggregated stress-scenario capital. All inputs are losses ≥ 0.