Main Concepts of Default Risk Capital Requirements
No: 44047144
Date(g): 27/12/2022 | Date(h): 4/6/1444
Status: In-Force
Effective from Jan 01 2023 - Dec 31 2022 To view other versions open the versions tab on the right
8.1
The default risk capital (DRC) requirement is intended to capture jump-to-default (JTD) risk that may not be captured by credit spread shocks under the sensitivities- based method. DRC requirements provide some limited hedging recognition. In this chapter offsetting refers to the netting of exposures to the same obligor (where a short exposure may be subtracted in full from a long exposure) and hedging refers to the application of a partial hedge benefit from the short exposures (where the risk of long and short exposures in distinct obligors do not fully offset due to basis or correlation risks).
