Document ID: chunk:federal_register_of_legislation:F2023L00288:reg:5:p17
Version: federal_register_of_legislation:F2023L00288
Segment Type: reg
Provision Reference: reg 5 (pt 17/27)
Character Range: 69362–71869

for the last day in the reporting period.

Column 4 - Average stressed VaR over past 60 trading days

Calculate the average daily total stressed VaR measure for the 60 trading days, up to and including the last day of the quarter.

Columns 5 & 6 - Back-testing exceptions

An ADI using an internal model must perform back-tests using both actual and hypothetical trading outcomes (refer to paragraph 82 of Attachment C to APS 116).  The results of back-testing on both an actual and a hypothetical basis must be reported in columns 5 and 6 respectively.

An ADI must use the most recent 250 days of aggregated profit and loss and VaR data, up to and including the last day in the quarter (refer to paragraphs 81 to 87 of Attachment C to APS 116 and paragraphs 65 to 85 of APG 116), to calculate the number of exceptions. The aggregated data should consist of the profit and loss and VaR data that apply to all asset classes for which the ADI's internal model is used to calculate a capital charge. Using this data, an ADI should compare each day's trading outcome (profit or loss) with the corresponding VaR number.  If the trading outcome on a particular day is a loss that exceeds the corresponding VaR number for that day, the result is recorded as an exception. An ADI must report the number of exceptions that occur over the 250 days.

Column 7 & 8 - Scaling factor (VaR and stressed VaR)

The scaling factor for VaR and stressed VaR consists of a multiplication factor and a plus factor (refer to paragraph 3 of Attachment C to APS 116). A separate multiplication factor is set for VaR and stressed VaR (refer to paragraph 3 of Attachment C to APS 116 and paragraph 30 of APG 116). The multiplication factor is set for each ADI by APRA, and is subject to a minimum of three.

The plus factor is specified by APRA and relates directly to the quarterly back-testing results (refer to paragraphs 81 to 87 of Attachment C to APS 116 and paragraphs 65 to 85 of APG 116). The same plus factor applies to both VaR and stressed VaR.

Column 9 &10 - Scaled average VaR and stressed VaR

Multiply the number in column 2 Average VaR over past 60 trading days by the number in column 7 Scaling factor (VaR) to determine the scaled average VaR.

Multiply the number in column 4 Average stressed VaR over past 60 trading days by the number in column 8 Scaling factor (stressed VaR) to determine the scaled average stressed VaR.

6.  Incremental risk charge

Where the VaR measures include an estimation