Implementation Note

Base Currency and Jurisdiction

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 Naming

In the BCBS 457 specification, the FX risk-factors are a single currency ([MAR21.14]), and each FX bucket contains a single risk-factor.

The FX Delta and Curvature sensitivities are calculated by shocking the FX rate for the currency pair of the risk-factor and the reporting/base currency.

To support multiple jurisdictions, the accelerator needs to handle multiple sensitivities for the same risk-factor. And for technical reasons, these different sensitivities must use different names for the risk-factors.

Hence, in the accelerator, the generated risk-factor names are a currency pair, even though the risk-factor is actually a single currency.