Document ID: chunk:federal_register_of_legislation:F2024L01182:body:0:p14
Version: federal_register_of_legislation:F2024L01182
Segment Type: other
Provision Reference: 
Character Range: 36279–39265

a simulation method under which:
         1.           the ADI designates every risk factor to be either perturbed or derived. This designation forms part of the approved IRRBB model, must be documented, and any change to it constitutes a model change;
         2.           there is one simulated scenario for each observation date;
         3.           for each perturbed risk factor and observation date, the simulated value of the risk factor to be used in the scenario for that observation date is:
where:
are the values of the risk factor at the calculation date, the observation date and ten business days before the observation date respectively; and
 1.           for each derived risk factor and observation date, the ADI must derive the simulated value of the risk factor at that date to be used in the scenario from the values simulated for other risk factors for the scenario.
 1.          For non-market-related items, only the risk factor values in the NMR curves that are used to discount notional cash flows may differ between the calculation of Pre-shock and Post-shock EVs for a given set of repricing assumptions (see paragraph 24 of this Attachment). The notional cash flows in the Pre-shock and Post-shock EVs must be the same, other than for items with optionality, and for which APRA has approved a different treatment under paragraph 34 of this Attachment.
 2.          For market-related items, Post-shock EVs must be determined using either full revaluation or a sensitivity-based method approved by APRA. Risk factors whose values differ between the calculations of Pre-shock and Post-shock EVs are not limited to discount curves. Where a counterparty to an item, including an ADI customer, may exercise a choice in relation to the item, the ADI must assume the counterparty will exercise the choice in the way that is most adverse to the ADI.

Repricing Assumptions
 1.          An ADI's repricing assumptions consist of:
         1.           the classification of banking book items into the categories described in paragraphs 4 to 9 of this Attachment;
         2.           the allocations of types of OPI items to contractual or behavioural repricing profiles (see paragraph 33 of this Attachment); and
         3.           the method of determining the cash flow profile (see paragraph 24 of this Attachment) for non-market-related items, including the method for adjusting it in response to unexpected changes to the items, such as prepayments different from expectations.
 2.          In the calculations set out in paragraphs 16 to 21 of this Attachment, an ADI must use the following sets of repricing assumptions:
         1.           the central assumptions, which are the ADI's own repricing assumptions, chosen in accordance with paragraphs 24 to 36 of this Attachment;
         2.           the shorter assumptions, determined in accordance with paragraph 37 of this Attachment; and
         3.           the longer assumptions, determined