SCR Calculator User Manual

Version 1.13.2.0 Last modified 2024-3-21

Australian LAGIC - Implementation Technicals


Single Asset Risk Capital

Single Asset Risk capital calculation is well-explained using the "Explain this Calculation" button.

In particular, the real interest rate and expected inflation stresses and the Probability of Defaults for credit spread stress are all updated for YE23 definitions.

  • Real interest rates stress updated: The stress adjustments to real interest rates are determined by multiplying the greater of three per cent or the nominal risk-free interest rates (before addition of any illiquidity premium), by 0.25 (upward stress) or by -0.20 (downward stress). The stress adjustments must be added to the nominal risk-free interest rates. The stress adjustments must also be added to real yields if these are used explicitly in the valuation of an asset or liability (e.g. inflation-indexed bonds). The maximum stress adjustment is 200 basis points in either direction. The minimum upward stress is 75 basis points and the minimum downward stress is 60 basis points. Nominal risk-free interest rates and real yields may be negative after applying the downward stress adjustment.
  • The stress adjustments to expected inflation rates are an increase of 125 basis points and a decrease of between 50 and 100 basis points. A downward stress of 50 basis points applies when the nominal risk-free interest rate (before addition of any illiquidity premium) is negative. A downward stress of 100 basis points applies when the nominal risk-free interest rate (before addition of any illiquidity premium) exceeds one per cent per annum. If the nominal risk-free interest rate (before addition of any illiquidity premium) is between zero and one per cent per annum, the downward stress is determined as the sum of 50 basis points and half of the nominal risk-free interest rate (before addition of any illiquidity premium). The stress adjustments must be added to the nominal risk-free interest rates. The stress adjustments must also be added to any expected inflation rates included in the valuation of assets or liabilities. Nominal risk-free interest rates and expected inflation rates may be negative after applying the downwards stress adjustments.
  • Probability of default are updated to a higher set of values 1:2%,2: 2%,3:4%,4:6%,5:8%,6:12%,7:20% for 2024.

Portfolio-level Market Risk Aggregation

Market risks - 1) Real Interest Rate, 2) Inflation Rate, 3) Currency, 4) Equity, 5) Property, 6) Credit Spread are aggregated using an official correlation matrix: