saccr

Create saccr object to support ISDA SA-CCR workflows for credit risk

Since R2024a

Description

Create a saccr object using this workflow:

1. Create a SA-CCR CRIF file.

   The ISDA^® SA-CCR Common Risk Interchange Format (CRIF) is a standardized format developed by the International Swaps and Derivatives Association (ISDA) for reporting counterparty credit risk exposures under the Standardized Approach for Counterparty Credit Risk (SA-CCR) framework. For more information on creating an ISDA SA-CCR CRIF file, see ISDA SA-CCR CRIF File Specifications. SA-CCR functionality meets ISDA benchmarks for use in the saccr object.

2. Create a saccr object

   Use saccr to create a saccr object. The following objects are contained in the saccr object: Portfolio, NettingSet, CollateralSet, CollateralPosition, and Trade. For more information, see saccr Object Structure and SA-CCR Transactional Elements.

3. Use saccr object functions.

   Use the following functions to calculate replacement cost (RC), add-ons, potential future exposure (PFE), and exposure at default (EAD):

   • rc

   • addOn

   • pfe

   • ead

4. Aggregate EADs.

   After using addOn and ead, you can use aggregate to aggregate add-ons over all asset classes or EADs over all portfolios.

   After using ead, you can use the aggregateByCounterparty to aggregate EADs by counterparty.

For more information on this workflow and a list of examples, see SA-CCR Transactional Elements and Framework for Standardized Approach to Calculating Counterparty Credit Risk: Introduction.

Creation

Syntax

mySACCR = saccr(SACCRCRIF)

mySACCR = saccr(___,Name=Value)

Description

mySACCR = saccr(SACCRCRIF) creates a saccr object and sets the properties. The saccr object provides an object-based framework that supports Basel-compliant, International Swaps and Derivatives Association (ISDA) workflows for calculating the capital banks must hold to cover the risk that a derivative's trading partner will fail to pay its obligation.

mySACCR = saccr(___,Name=Value) sets optional properties using name-value arguments in addition to the required argument in the previous syntax. For example, mySACCR = saccr("SACCR_CRIF.xlsx",Alpha=1.3,DomesticCurrency="EUR",MaturityBusinessDaysFloor=7,NumBusinessDaysYear=255) creates a saccr object. You can specify multiple name-value arguments.

Input Arguments

SACCRCRIF — ISDA SA-CCR Common Risk Interchange Format (CRIF) data

string with filename for ISDA SA-CCR Common Risk Interchange Format (CRIF) data

ISDA SA-CCR Common Risk Interchange Format (CRIF) data, specified as a string.

The ISDA SA-CCR CRIF file facilitates the exchange of counterparty credit risk information between market participants and regulatory authorities. It provides a structured and consistent format for reporting key data elements related to derivative transactions and their associated counterparty credit risk.

The ISDA SA-CCR CRIF file typically includes information such as:

• Trade-level data — This data includes details about the derivative contracts, such as trade identifiers, product type, adjusted notional amount, maturity, and valuation.

• Counterparty data — This data includes information about the counterparties involved in the transactions, such as legal entity identifiers (LEIs), names, addresses, and credit ratings.

• Risk data — This data includes data related to the calculation of counterparty credit risk, such as supervisory deltas and netting sets.

• Collateral data — This data includes information about any collateral posted or received in relation to the derivative transactions, such as collateral type, amount, and haircuts.

The ISDA SA-CCR CRIF file is based on industry-standard data formats, such as eXtensible Markup Language (XML) or comma-separated values (CSV). It follows a predefined schema that specifies the structure and data elements required for reporting counterparty credit risk exposures under the SA-CCR framework.

By using the ISDA SA-CCR CRIF file, market participants and regulatory authorities can efficiently exchange and analyze counterparty credit risk information, enabling better risk management and regulatory compliance.

For more information on creating an ISDA SA-CCR CRIF file, see ISDA SA-CCR CRIF File Specifications.

Data Types: string

Name-Value Arguments

Specify required and optional pairs of arguments as Name1=Value1,...,NameN=ValueN, where Name is the argument name and Value is the corresponding value. Name-value arguments must appear after other arguments, but the order of the pairs does not matter.

Example: mySACCR = saccr("SACCR_CRIF.xlsx",Alpha=1.3,DomesticCurrency="EUR",MaturityBusinessDaysFloor=7,NumBusinessDaysYear=255)

Alpha — Alpha value for each portfolio EAD

1.4 for each portfolio EAD (default) | nonnegative numeric | vector of nonnegative numeric

Alpha value for each portfolio EAD, specified as a scalar nonnegative value or a NumPortfolios-by-1 nonnegative numeric vector.

Data Types: double

DomesticCurrency — Indicator for domestic currency

"USD" (default) | string

Indicator for domestic currency, specified as a scalar string for the three-letter ISO currency code.

Data Types: string

FXSpotRates — Spot foreign exchange rates

table.empty (default) | table

Spot foreign exchange rates, specified as a table with the following columns:

• Base — String vector for base currencies (["AUD";"EUR";…])

• Quote — String vector for quote currencies (["AUD";"EUR";…])

• SpotRate — Numeric vector for spot exchange rates([0.8;1.2;…])

Data Types: table

InputVariants — Preferred input variant 1a or 1b for trade adjusted notionals for each asset

["1a";"1a";"1a";"1a","1b"] (default) | vector of strings

Preferred input variant 1a or 1b for trade adjusted notionals for each asset, specified as a 5-by-1 vector of strings for each asset class in the following order:

1. IR — Interest rate

2. CR — Credit

3. EQ — Equity

4. CO — Commodity

5. FX — Foreign exchange

InputVariants sets the TradeDecompositions property. The trade decompositions input variants can be only either 1a or 1b:

• 1a — Single data input

  For example, an interest-rate cap trade's adjusted notional is represented in a single set of input data as a single instrument. In the SA-CCR CRIF file, this input variant has a trade ID that does not end with an underscore followed by a number (for example, "Tr071").

• 1b — Decomposed data inputs

  For example, an interest rate cap trade's adjusted notional is represented in multiple sets of input data that are decomposed into individual caplets. In the SA-CCR CRIF file, this input variant has trade IDs that end with an underscore followed by a number (for example, "Tr071_01", "Tr071_02", and so on).

Note

If the SA-CCR CRIF file contains data for both input variants for a trade, the specified input variant will be chosen. If the specified input variant is not present in the SA-CCR CRIF file, whichever input variant that is in the SA-CCR CRIF file applies to the trade.

Data Types: string

MaturityBusinessDaysFloor — Minimum number of business days remaining in maturity

10 (default) | numeric

Minimum number of business days remaining in maturity, specified as a scalar numeric.

Data Types: double

NumBusinessDaysYear — Number of business days in a year in relation to maturity times and MPOR

250 (default) | numeric

Number of business days in a year in relation to maturity times and margin period of risk (MPOR), specified as a scalar numeric.

Data Types: double

Properties

CRIF — ISDA SA-CCR CRIF data

CRIF data

This property is read-only.

ISDA SA-CCR CRIF data, returned as a table.

Data Types: table

NumPortfolios — Number of portfolios

numeric

This property is read-only.

Number of portfolios, returned as a scalar numeric.

Data Types: double

PortfolioIDs — Portfolio IDs

string vector

This property is read-only.

Portfolio IDs, returned as a NumPortfolios-by-1 string vector.

Data Types: string

CounterpartyIDs — Counterparty IDs

string vector

This property is read-only.

Counterparty IDs, returned as a NumPortfolios-by-1 string vector.

Data Types: string

Portfolios — Portfolio objects

vector of objects

This property is read-only.

Portfolio objects, returned as a NumPortfolios-by-1 vector of objects. For more information, see Portfolio.

Data Types: object

Regulation — Indicator of Basel regulation

"Basel_CRE52" (default) | string

This property is read-only.

Indicator of Basel regulation, returned as scalar string with a value of "Basel_CRE52".

Data Types: string

DomesticCurrency — Indicator for domestic currency

"USD" (default) | string

This property is read-only.

Indicator for domestic currency, returned as a scalar string for the three-letter ISO currency code.

Data Types: string

Alpha — Alpha value for each portfolio EAD

1.4 for each portfolio EAD (default) | nonnegative numeric | vector of nonnegative numeric

This property is read-only.

Alpha value for each portfolio EAD, returned as a scalar nonnegative value or a NumPortfolios-by-1 nonnegative numeric vector.

Data Types: double

FXSpotRates — Spot foreign exchange rates

table.empty (default) | table

This property is read-only.

Spot foreign exchange rates, returned as a table with the following columns:

• Base — String vector for base currencies (["AUD";"EUR";…])

• Quote — String vector for quote currencies (["AUD";"EUR";…])

• SpotRate — Numeric vector for spot exchange rates([0.8;1.2;…])

Data Types: table

TradeDecompositions — Preferred trade adjusted notional input variants for each asset class

table

This property is read-only.

Preferred trade adjusted notional input variants for each asset class, returned as a table in the following order:

1. IR — Interest rate

2. CR — Credit

3. EQ — Equity

4. CO — Commodity

5. FX — Foreign exchange

Data Types: table

CollateralHaircuts — Supervisory collateral haircuts for each collateral position instrument type

table

This property is read-only.

Supervisory collateral haircuts for each collateral position instrument type, returned as a table.

Data Types: table

SupervisoryParameters — Supervisory parameter data

table

This property is read-only.

Supervisory parameter data, returned as a table that includes:

• Supervisory factors

• Supervisory correlations

• Supervisory option volatilities

Data Types: table

MaturityBusinessDaysFloor — Minimum number of business days remaining in maturity

10 (default) | numeric

This property is read-only.

Minimum number of business days remaining in maturity, returned as a scalar numeric.

Data Types: double

NumBusinessDaysYear — Number of business days in a year in relation to maturity times and MPOR

250 (default) | numeric

This property is read-only.

umber of business days in a year in relation to maturity times and margin period of risk (MPOR), returned as a scalar numeric.

Data Types: double

Object Functions

rc	Calculate complete replacement cost (RC) for each portfolio
addOn	Calculate add-ons aggregated from all asset classes for each portfolio
pfe	Calculate potential future exposure (PFE) for each portfolio
ead	Calculate exposure at default (EAD) value for each portfolio

Examples

Create saccr Object Using SA-CCR CRIF File

Use an ISDA® SA-CCR Common Risk Interchange Format (CRIF) data file to create a saccr object. You can use the saccr object and the associated object functions for reporting counterparty credit risk exposures under the Standardized Approach for Counterparty Credit Risk (SA-CCR) framework.

SACCRCRIF = "SACCR_CRIF_Ports_7_8_9.csv";
mySACCR = saccr(SACCRCRIF)

mySACCR = 
  saccr with properties:

                         CRIF: [42×19 table]
                NumPortfolios: 3
                 PortfolioIDs: [3×1 string]
              CounterpartyIDs: [3×1 string]
                   Portfolios: [3×1 saccr.Portfolio]
                   Regulation: "Basel_CRE52"
             DomesticCurrency: "USD"
                        Alpha: [3×1 double]
                  FXSpotRates: [0×0 table]
          TradeDecompositions: [5×2 table]
           CollateralHaircuts: [200×6 table]
        SupervisoryParameters: [19×7 table]
    MaturityBusinessDaysFloor: 10
          NumBusinessDaysYear: 250

You can then use the rc, addOn, pfe, and ead functions with the saccr object.

Create saccr Object and Find Results for Specific PortfolioID

Use an ISDA® SA-CCR Common Risk Interchange Format (CRIF) data file to create a saccr object and then find the results for a specific PortfolioID ("Port_008").

Define the foreign exchange (FX) spot currency exchange rate table.

format("default");
Base = ["EUR";"GBP";"GBP"];
Quote = ["USD";"USD";"EUR"];
SpotRate = [1.0543;1.2195;1.1567];
FXSpotTable = table(Base,Quote,SpotRate);
format bank;

The SA-CCR CRIF data file (SACCR_CRIF_Ports_7_8_9.csv) contains the following portfolios:

Portfolio 7 (Port_007)

• Trades

Tr001 — (Asset class IR) 10 Year Interest Rate Swap in EUR

Tr002 — (Asset class FX) EUR/GBP Forward FX Swap (Trade Decomposition "1b")

Tr003 — (Asset class CR_SN) Single name CDS on Spain (Short Protection)

Tr004 — (Asset class CR_IX) CDS iTraxx Europe Crossover Index Receiver Option

Tr005 — (Asset class EQ_SN) Long Call Option on AAPL

Tr006 — (Asset class EQ_IX) Long Put Option on S&P500 Index

Tr007_SOpt — (Asset class CO) Long Put Option on CORN (sold option with premium paid)

• Netting Sets — N001

• Collateral Sets

Collateral Set ID — CSA01

Direction — MUTUAL

Margin Period of Risk (MPOR) — 10 days

Minimum Transfer Amount (MTA) — 0

Threshold Amount (TA) — 0

• Collateral Positions

ColPos01 — (CASH, Domestic Currency, Variation Margin)

ColPos02 — (CASH, Foreign Currency, Variation Margin)

ColPos03 — (BOND, Sovereign AAA, Initial Margin

Portfolio 8 (Port_008)

• Trades

Tr008 — (Asset class EQ_IX) Long Variance Swap on EURO STOXX 50 (EQUITY_VOL trade)

Tr009 — (Asset class IR) 10 Year FedFunds / 3M SOFR Basis Swap (USD_BASIS trade)

• Netting Sets — N002

• Collateral Sets

Collateral Set ID — CSA02

Direction — MUTUAL

Margin Period of Risk (MPOR) — 20 days

Minimum Transfer Amount (MTA) — 100000 USD

Threshold Amount (TA) — 1000000 USD

• Collateral Positions

ColPos04 — (EQUITY, Main Index, Variation Margin)

ColPos05 — (GOLD, Initial Margin)

Portfolio 9 (Port_009)

• Trades

Tr010 — (Asset class CO) Short WTI Crude Futures Put Option

Tr011 — (Asset class CO) Long Gold Futures Call Option

Tr012 — (Asset class CO) Long Bitcoin Futures Call Option

• Netting Sets — N003

• Collateral Sets

Collateral Set ID — CA03

Direction — MUTUAL

Margin Period of Risk (MPOR) — 10 days

Minimum Transfer Amount (MTA) — 50000 USD

Threshold Amount (TA) — 500000 USD

• Collateral Positions — None

• Counterparty ID — Exchange

Create a saccr object using the data file SACCR_CRIF_Ports_7_8_9.csv.

SACCRCRIF = "SACCR_CRIF_Ports_7_8_9.csv";
mySACCR = saccr(SACCRCRIF)

mySACCR = 
  saccr with properties:

                         CRIF: [42×19 table]
                NumPortfolios: 3.00
                 PortfolioIDs: [3×1 string]
              CounterpartyIDs: [3×1 string]
                   Portfolios: [3×1 saccr.Portfolio]
                   Regulation: "Basel_CRE52"
             DomesticCurrency: "USD"
                        Alpha: [3×1 double]
                  FXSpotRates: [0×0 table]
          TradeDecompositions: [5×2 table]
           CollateralHaircuts: [200×6 table]
        SupervisoryParameters: [19×7 table]
    MaturityBusinessDaysFloor: 10.00
          NumBusinessDaysYear: 250.00

Compute exposure-at-default (EAD) results using the object function ead.

EADResults = ead(mySACCR)

EADResults = 
  EADResults with properties:

       NumPortfolios: 3.00
        PortfolioIDs: [3×1 string]
     CounterpartyIDs: [3×1 string]
          Regulation: "Basel_CRE52"
    DomesticCurrency: "USD"
                 EAD: [3×1 double]
               Alpha: [3×1 double]
                  RC: [3×1 double]
                 PFE: [3×1 double]
          Multiplier: [3×1 double]
      AddOnAggregate: [3×1 double]
           RCResults: [1×1 saccr.RCResults]
          PFEResults: [1×1 saccr.PFEResults]
        ResultsTable: [3×17 table]

Specify the PortfolioID for "Port_008".

PortoflioID = "Port_008";
Idx = strcmpi(mySACCR.PortfolioIDs,PortoflioID);

Find the SA-CCR Portfolio object for PortfolioID "Port_008".

PortfolioObj = mySACCR.Portfolios(Idx)

PortfolioObj = 
  Portfolio with properties:

                ID: "Port_008"
    CounterpartyID: ""
            Trades: [2×1 saccr.Trade]
       NettingSets: [1×1 saccr.NettingSet]
      AssetClasses: [2×1 string]
       HedgingSets: [2×1 string]

Find the SA-CCR results for the PortfolioID "Port_008".

PortfolioEADResultsTable = EADResults.ResultsTable(Idx,:)

PortfolioEADResultsTable=1×17 table
    PortfolioIDs    CounterpartyIDs     Regulation      DomesticCurrency       EAD        Alpha        RC           PFE       Multiplier    AddOnAggregate    AddOnIR     AddOnFX    AddOnCR     AddOnEQ     AddOnCO    Collateralized    UsedCollateral
    ____________    _______________    _____________    ________________    __________    _____    __________    _________    __________    ______________    ________    _______    _______    _________    _______    ______________    ______________

     "Port_008"           ""           "Basel_CRE52"         "USD"          2360845.21    1.40     1155548.94    530769.06       1.00         530769.06       83467.45     0.00       0.00      447301.61     0.00          true              true      

More About

SA-CCR

SA-CCR (Standardized Approach for Counterparty Credit Risk) is a Basel Committee on Banking Supervision framework for calculating the exposure at default (EAD) and capital requirements for counterparty credit risk in derivative transactions, including over-the-counter (OTC) and exchange-traded derivatives.

Replacing the Current Exposure Method (CEM) and Standardized Method (SM), SA-CCR offers a more risk-sensitive measure of counterparty credit risk, accounting for the derivative type, netting agreements, collateral, and potential future exposure. It considers both specific risk (individual counterparties) and general risk (overall portfolio) and introduces a nonlinear treatment of netting and collateral for more precise calculations. This approach aligns capital requirements with actual risk exposure, providing a comprehensive, risk-sensitive counterparty credit risk assessment. Implemented globally as part of Basel III, it ensures standardized counterparty credit risk capital requirement calculations across financial institutions.

Counterparty Credit Risk

Counterparty credit risk (CCR) is the risk of default by parties in derivative transactions before final settlement.

Derivatives, whose values depend on underlying assets, hedge risks associated with those assets. Changes in the value of these underliers directly affect the derivative's value, creating off-balance-sheet counterparty credit risk exposures. These exposures are quantified as exposure-at-default (EAD) for capital adequacy. Derivatives trading can occur as:

• Over-the-counter (OTC) transactions — Direct trades between participants with daily margin requirements reflecting market changes. Collateral is required against exposure, and exposures are netted bilaterally to determine a single net payment obligation.

• Central counterparties (CCP) — An exchange with uniform margin and collateral requirements. Exposures are netted multilaterally, with all payments sent to a single netting center, and all exposure is against the central counterparty.

An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm's exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss: the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factors [2].

saccr Object Structure

The saccr object contains classes for Portfolio, NettingSet, CollateralSet, CollateralPosition, and Trade.

In this framework, the following terminology applies:

• Portfolio — A portfolio is a collection of derivative contracts with the same counterparty, covered by legally enforceable netting agreements. These contracts, which can vary from interest rate to credit derivatives, are managed collectively to calculate counterparty credit risk. The portfolio's defining feature is its ability to offset exposures and reduce credit risk through its netting agreements.

• Netting — Netting is the process of offsetting exposures to reduce credit risk through legally enforceable agreements, consolidating derivative contracts within a portfolio for net-based credit risk calculation. It provides a more accurate counterparty credit risk assessment and reduces capital requirements by recognizing risk-reducing benefits. SA-CCR has two types of netting:

  • Close-Out Netting — A legal agreement allowing offsetting of positive and negative exposures upon default or termination, resulting in a single net exposure.

  • Collateral Netting — The use of collateral to offset exposures and reduce credit risk, considered when calculating net exposure.

• Collateral — Collateral is an asset, like cash or securities, pledged by a counterparty in derivative transactions to mitigate credit risk and protect against potential losses. It serves two main purposes:

  • Risk Mitigation — Collateral acts as a buffer against potential losses during default or termination of contracts, reducing credit risk.

  • Netting and Exposure Calculation — Collateral is considered when calculating net exposure and credit risk under SA-CCR, reducing capital requirements. The eligible collateral value, typically subject to haircuts for potential market volatility or liquidity risks, is considered a reduction in exposure.

• Collateral Position — A collateral position represents the status, value, and quality of the collateral involved in derivative transactions, playing a crucial role in determining credit risk mitigation and exposure calculation under SA-CCR. It assesses potential loss absorbency and risk reduction provided by the collateral, influencing net exposure and capital requirements. Key aspects in SA-CCR include:

  • Collateral Value — The aggregate market value of the held collateral, which can include various eligible instruments.

  • Haircuts — Percentage reductions applied to collateral value to account for potential market volatility or liquidity risks.

  • Eligibility Criteria — Requirements that collateral must meet to be considered under SA-CCR, such as liquidity and reliable valuation.

  • Collateral Agreements — Contractual terms outlining rights and obligations related to collateral posting, maintenance, and release.

• Margining — Margining is the process of requiring collateral to cover potential losses in derivative transactions, reducing counterparty credit risk and lowering SA-CCR exposure and capital requirements. Key concepts include:

  • Initial Margin — The upfront collateral required at the start of a derivative transaction, serving as a buffer against losses.

  • Variation Margin — Regularly adjusted collateral reflecting the current market value of the positions.

  • Margin Calls — Requests for additional collateral triggered by changes in market prices or risk factors.

  • Collateral Rehypothecation — The re-use of posted collateral by the receiving party, subject to conditions and agreements, providing protection to the posting party.

• Trade — A trade is a single derivative transaction between two counterparties, used as a unit for calculating counterparty credit risk and capital requirements. Under SA-CCR, each trade is individually evaluated based on its risk profile, underlying assets, and terms. Trades are grouped into portfolios based on the counterparty and netting agreements for aggregation and risk offset consideration. The SA-CCR framework considers factors like notional amount, market value, remaining maturity, risk factors, and add-on factors for each trade. This detailed analysis, considering both individual trades and portfolio netting benefits, provides a comprehensive assessment of counterparty credit risk, helping to determine capital requirements to cover potential losses.

For more information on the elements of the SA-CCR regulatory framework, see SA-CCR Transactional Elements.

References

[1] Bank for International Settlements. "CRE52 - Standardised Approach to Counterparty Credit Risk." June 2020. Available at: https://www.bis.org/basel_framework/chapter/CRE/52.htm.

[2] Bank for International Settlements. "CRE51 - Counterparty Credit Risk Overview." January 2022. Available at: https://www.bis.org/basel_framework/chapter/CRE/51.htm.

[3] Bank for International Settlements. "CRE22- Standardised Approach: Credit Risk Migration." November 2020. Available at: https://www.bis.org/basel_framework/chapter/CRE/22.htm.

[4] Bank for International Settlements. "Basel Committee on Banking Supervision: The Standardised Approach for Measuring Counterparty Credit Risk Exposures." April 2014. Available at: https://www.bis.org/publ/bcbs279.pdf.

Version History

Introduced in R2024a