SCR Calculator User Manual

Version 1.13.2.0 Last modified 2024-3-21

Floating Rate Modelling


Curve-based Shocks

Floating rate asset cashflows are affected by regulatory yield curve shock scenarios that define interest rate risk capital amounts.

Their cashflows and present value are modelled via the following procedures:

  • Convert the spot curve into a forward curve (there is a tool "Spot to Forward" in Menu that can verify the workings of this function).
  • Interpolate the forward curve to work out the exact rates corresponding to the asset's coupon dates.
  • Assuming the forward rates realise and calculate future coupons as [float margin] + [forward rate] for each future point in time.
  • The present value is obtained by discounting with the spot curve.

When calculating interest rate capital:

  • (For both floating and fixed assets) in the base scenario, a credit spread is goal-sought on top of the base curve to march the given market value.
  • In a shocked scenario, the present value is recalculated using the shocked yield curve and the credit spread (assuming unchanged).
  • The difference between the base and shocked present value is the interest rate risk capital. Positive figure means a stress.

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