> ## Documentation Index
> Fetch the complete documentation index at: https://docs.activeviam.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Residual risk add on

<Badge color="gray" size="lg">[rrao](./measures/standardisedapproach/rrao)</Badge>

|                 |                                                                                                                                           |
| --------------- | ----------------------------------------------------------------------------------------------------------------------------------------- |
| **Description** | The Residual risk add-on, RRAO                                                                                                            |
| **Variations**  | [incremental](./incremental), [pro\_rata](./pro_rata), [euler](./euler)                                                                   |
| **Reference**   | [\[MAR23.8\]](https://www.bis.org/basel_framework/chapter/MAR/23.htm?inforce=20230101\&published=20200327#paragraph_MAR_23_20230101_23_8) |
| **Formula**     | $\displaystyle RRAO = Addon \cdot Gross Notional$                                                                                         |

Residual Risk Add On is computed for trades bearing residual risk as a percentage of gross notional.

Trades bearing residual risk can be filtered using hierarchy [Risk Classes](./risk-classes) value “RRAO”.

Please note, that this measure disregards the actual capital treatment of individual positions and computes charges as if all positions are under SA. We recommend applying a filter on [FRTB Model](./frtb-model) equal to “SA” to limit the scope to positions officially under the “SA” approach.