the FRTB Accelerator
provides support for using a base currency, as
described in [MAR21.14], and for changing the base and reference
currencies as part of the jurisdictional support. This support involves
transformations and filtering of the sensitivities and risk-factors; the
details of this are documented in [FRTB FX Base and Reporting Currencies](../../../../../Content/PDFs_home-page/FRTB FX Base and Reporting Currencies v1.0 2019-06-28.pdf)
and are beyond the scope of the current document.
If base currency and jurisdictional support are not required, then
setting the counter currency to be the same as the reporting currency
for all FX Delta and Curvature risk-factors (as in [MAR21.24](2))
will avoid the translations and filters.
For Vega, no translations or filters are applied.
Base Currency Ambiguity
When computing the FX Delta sensitivity in [MAR21.24], the FX spot
rate used will be for the currency pair whose right hand currency is
the bank’s “base currency”. This is the opposite of the common
definition of a currency pair where the term “base currency” is often
used to refer to the left hand currency of the pair.
Risk Factor and Bucket Naming
In the BCBS 457 specification, for Delta and Curvature the FX risk-factors
are a currency pair where the counter currency is the reporting/base
currency ([MAR21.14]), and similarly for the FX buckets ([MAR21.86]).
Because the reporting/base currency is fixed when calculating the capital charge,
it can be dropped from the bucket name. So that the Delta and Curvature buckets
are the left-hand side of the currency pair. This is consistent with worked example 3
in the note that accompanies BCBS 457.
The risk-factor name, when generated will still be the currency pair as this is used when
supporting multiple jurisdictions.
For FX Vega, the currency pair is not restricted to the reporting/base currency.
So the bucket name is the currency pair.