basel-rwa-market

To calculate Basel III FRTB market risk capital, the desk's exposures are processed through SA components like SBM, DRC, and RRAO, or via IMA, applying capital aggregation rules to produce a compliant charge.

The SA-TB approach calculates capital using standardized components like SBM and DRC, while IMA relies on internal models, requiring desk-level eligibility checks through PLA and backtesting to validate capital charges.

The DRC component calculates default risk capital for trading desks by applying specific risk weights to credit exposures, isolating default and credit spread risks from general market movements under Basel III FRTB rules.

Yes, loadable jurisdiction overlays can be applied to FRTB market risk calculations to support regulatory reporting, ensuring computed capital charges align with specific regional or national banking authority requirements.

Yes, internal models approach (IMA) requires desk-level PLA and backtesting results to determine eligibility, ensuring the internal model accurately predicts risks before it is approved for FRTB capital aggregation.

The RRAO component applies a standardized capital charge to non-modellable risk factors, treating them conservatively because they lack sufficient data for internal modeling, which may result in higher capital requirements.