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This note describes how Atoti FRTB interprets and for the CSR Sec non-CTP risk class.

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MAR21.71

The relationship between the first and second sentences of is unclear. The description in the second sentence is not a good match for the correlation parameter in the first sentence, and it is not easy to determine the intention. So, Atoti FRTB supports three possible interpretations of and provides configuration parameters to choose between them. The configuration parameters enable choosing between:
  • Should K_otherK\_{other} be added after taking the square root in and , or should the term Kother2K_{other}^2 be included inside the square root?
  • Should the correlation with the “other” bucket (γb other\gamma_{b\ other}) be 1 or 0?
By default, the configuration parameters are set so that the calculations match those in BCBS 352. An alternative, and equally valid, interpretation of would be to treat the “other” bucket the same as the other risk classes.

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MAR21.68

Consider two tranches A and B in the same pool with attachment points A1 and B1, and detachment points A2 and B2. The overlap is calculated using MIN(A2 - A1, B2 - B1, MAX(A2 - B1, 0), MAX(B2 - A1, 0)) / MAX(A2 - A1, B2 - B1). This is compared to the threshold of 0.8 (80%). The Pool “N/A” is treated differently. Two different tranches in this pool will never be considered to overlap.