Annex Formulae to be used for the purpose of Aggregating AVAs under Article 9(6), Article 10(7) and Article 11(7)
Formula for Method 1
| APVA | = | (FV – PV) – α . (FV – PV) |
| = (1 – α) . (FV – PV) | ||
| AVA | = | Σ APVA |
- 01/01/2022
Formula for Method 2
| APVA | = | max {0, (FV – PV) – α . (EV – PV)} |
| = max {0, FV – α . EV – (1 – α) . PV} | ||
| AVA | = | Σ APVA |
Where:
FV = The valuation exposure-level fair value after any accounting adjustment applied in the institution's fair value that can be identified as addressing the same source of valuation uncertainty as the relevant AVA,
PV = The valuation exposure-level prudent value determined in accordance with this Chapter 4 of the Trading Book (CRR) Part of the PRA Rulebook,
EV = The expected value at a valuation exposure level taken from a range of possible values,
α = The aggregation factor,
APVA = The valuation exposure-level AVA after adjusting for aggregation,
AVA = The total category-level AVA after adjusting for aggregation.
Institutions shall set the aggregation factor 'α' at 50%.
[Note: This rule corresponds to the annex of Part 2 of Regulation (EU) No 2016/101 as it applied immediately before revocation by the Treasury.]
- 01/01/2022