Interpretation Note

The FAQ for [MAR21.8] specifies that inflation and cross-currency bases should be considered for Vega risk factors, without an underlying residual maturity dimension. However, [MAR21.93] and [MAR21.94] do not specify the correlation parameter $\rho_{kl}$ when one of the underlyings is an Inflation or Basis curve (and hence do not have an underlying maturity).

In the accelerator, when one of the underlying curves is an inflation or cross-currency basis curve, we use [MAR21.94] with $\rho_{kl}^{(DELTA)}$ equal to 0% or 40% as determined by [MAR21.48] and [MAR21.49].