EBA · 2024_6993 Rejected question

Consideration of CDS on itraxx main and itraxx crossover as eligible hedges in SA-CVA

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
382, para. 4
Topic
Market risk
Submitted by
Individual
Submitted
2024-02-05

Question

It is possible to consider the CDS on itraxx main and itraxx crossover as eligible hedges in SA-CVA without including the perimeter exceptions specified in aticle 382.4?

Background

Under SA-CVA method  seems to be no option to consider CDS on itraxx main and itraxx crossover as eligible coverage without including the perimeter exceptions specified in aticle 382.4. Itraxx main and itraxx crossover do not comply with specifications in article383.b.4 and therefore their counterparty credit spread delta must be assigned to "qualified index" segmentation. However, the delta of the CVA portfolio will not be assigned to this segmentation because it does not comply with the article 383.o.3 and as a consequence the sensitivities will not be netted. Alternatively, there would be the option of decomposing the sensitivity of the CDS into the components of itraxx main and itraxx crossover. But there are components of these indexs that do not fall within the scope of KCVA (they are exclusions from article 382.4). And according to article 382.4.a, consider these hedges would imply including all the excluded operation in 382.4.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_6993

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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