Chapter 1, Article 9 · Commission Delegated Regulation (EU) 2024/397

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Article 9Downward and upward calibrated shock with the asymmetrical sigma method#

Under the asymmetrical sigma method, institutions shall determine the downward and upward calibrated shock from a time series of 10 business days returns for a non-modellable risk factor by applying the following steps in the following order:

(a)they shall determine the median of the returns within the time series, and split the 10 business days returns comprised in that time series into the following two subsets:

(i)the subset of 10 business days returns the value of which is equal to or lower than the median;

(ii)the subset of 10 business days returns the value of which is greater than the median;

(b)for each subset referred in point (a), they shall compute the mean of the 10 business days returns in the subset;

(c)they shall determine the downward calibrated shock in accordance with the following formula:downward calibrated shock– μ̂Ret mCES 1Ndown –1,5 Ni1, Reti mReti – μ̂Ret m20,951Ndown –1,5where:

—Ret denotes the time series of 10 business days returns of the non-modellable risk factor;

—Ret_i is the i-th return in the 10 business days returns time series Ret;

—m is the median of the 10 business days returns time series Ret;

—μ̂Ret m denotes the mean of the 10 business days returns computed in accordance with point (b) on the subset identified in accordance with point (a)(i);

—N_down is the number of 10 business days returns in the subset determined in accordance with point (a)(i);

—N is the number of returns in the 10 business days returns time series Ret;

—CES3;

(d)they shall determine the upward calibrated shock in accordance with the following formula:upward calibrated shockμ̂RetmCES 1Nup –1,5 Ni1, Reti mReti – μ̂Ret m20,951Nup –1,5where:

—Ret denotes the time series of 10 business days returns of the non-modellable risk factor;

—Ret_i is the i-th return in the 10 business days returns time series Ret;

—m is the median of the 10 business days returns time series Ret;

—μ̂Ret m denotes the mean of the 10 business days returns computed in accordance with point (b) on the subset determined in accordance with point (a)(ii);

—N_up is the number of returns in the subset determined in accordance with point (a)(ii);

—N is the number of returns in the 10 business days returns time series Ret;

—CES3.