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Netted

Naming pattern: Measures with “Netted” behavior follow the name pattern:Main Measure Name Netted.

Netted is an optional approach implemented in Atoti FRTB to map Legal Entities (and hence all sensitivities) to “netting sets” via an optional file and its corresponding store. Additionally, since 5.3.3, each book can be flagged as belonging to the “IRT Desk” or not. The capital charges can be calculated independently for each netting set and IRT Desk, then summed.

The netting sets only impact a specific set of measures. These comprise measures with this suffix, those with the “(reported)” suffix and the following measures (which are the ones requested in the CRR2 reporting template):

  • “risk-class risk-measure Risk Position scenario”
  • “risk-class risk-measure Risk Charge scenario”
  • “risk-class Curvature Sb scenario” (since 5.3.3)
  • “risk-class Delta Sensitivities direction”
  • “drc-risk-class Default Risk Charge”
  • “drc-risk-class Gross JTD direction”
  • “drc-risk-class Net JTD direction”
  • “drc-risk-class WtS Ratio”
  • “RRAO Exotic”
  • “RRAO Other”

Where:

Element is one of …
risk-class GIRR, CSR non-Sec, CSR Sec non-CTP, CSR Sec CTP, Equity, Commodity, FX
risk-measure Delta, Vega, Curvature
scenario blank (for medium correlation scenario), High, Low
direction Long, Short
drc-risk-class DRC non-Sec, DRC Sec non-CTP

Additionally, the SA measures that follow on from the above list are also impacted, up to the “Portfolio Risk Charge”.

The reported measure variation includes the impact of the netting sets and imported values. For example, “Portfolio Risk Charge (reported)”. The netting sets and imported values do not currently impact the unmodified measures; for example, “Portfolio Risk Charge” is not changed.

Overview of Netted Calculations

A Netting Set hierarchy allows for filtering by netting set. The capital charge calculations are performed with the netting sets as the leaf level, so that:

  • The capital charges are calculated without offsetting sensitivities across netting sets and IRT desks.
  • After the capital charges are calculated (independently) for each netting set and IRT desk, they are summed.
  • As with the “(reported)” suffix, the same set of measures are directly and indirectly impacted.

Follow this link to see the measures with the described behavior: Netted Measures.