> ## 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.

# Interpretation note

export const productName = "Atoti FRTB";

# [MAR21.71](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_71)

The relationship between the first and second sentences of
[MAR21.71](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_71) 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, {productName}
supports three possible interpretations of [MAR21.71](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_71) and provides
configuration parameters to choose between them.

The configuration parameters enable choosing between:

* Should $K\_{other}$ be added after taking the square root in
  [MAR21.4](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_4)(5) and [MAR21.5](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_5)(4), or should the term
  $K_{other}^2$ be included inside the square root?
* Should the correlation with the "other" bucket ($\gamma_{b\ other}$) 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 [MAR21.71](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_71) would be to treat the "other" bucket
the same as the other risk classes.

# [MAR21.68](https://www.bis.org/basel_framework/chapter/MAR/21.htm?inforce=20230101\&published=20200327#paragraph_MAR_21_20230101_21_68)

For 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)` and 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.