Our latest white paper provides practical guidelines on estimation of Exposure at Default, CCR default capital charge and standardized CVA capital charge, based on the methods proposed in Basel 2 and 3, and compares the capital charge imposed under different methods (Current Exposure Method, Standardized Method, Internal Model Method, and the recently proposed Non-Internal Model Method) and risk weighting approaches (Standardized and Internal Risk Based), using the calculations performed for a portfolio of derivatives in PrevioRisk software.

The results of practical implementation show that Internal Model Method of EAD estimation produces about a quarter (27-28%) lower CCR capital charge than Standardized and NIMM methods. Particularly, IMM allows to recognize fully the effect of netting and margining, and saves capital for trades influenced by market factors with low volatility. In addition, the results confirmed that IRB risk weighting approach results in lower required capital estimates than the Standardized one, with capital relief from IRB implementation reaching 35-40%.

The full text of white paper is available at our Research Papers page. You can also download it by the link below: