Article 225 › 2

The calculation of the volatility adjustments shall be subject to all the following criteria: (a) institutions shall base the calculation on a 99th percentile, one-tailed confidence interval; (b) institutions shall base the calculation on the following liquidation periods: (i) 20 business days for secured lending transactions; (ii) 5 business days for repurchase transaction, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities and securities lending or borrowing transactions; (iii) 10 business days for other capital market driven transactions; (c) institutions may use volatility adjustment numbers calculated according to shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point (b) for the type of transaction in question, using the square root of time formula: where: TM the relevant liquidation period; HM the volatility adjustment based on the liquidation period TM; HN the volatility adjustment based on the liquidation period TN. (d) institutions shall take into account the illiquidity of lower-quality assets. They shall adjust the liquidation period upwards in cases where there is doubt concerning the liquidity of the collateral. They shall also identify where historical data may understate potential volatility. Such cases shall be dealt with by means of a stress scenario; (e) the length of the historical observation period institutions use for calculating volatility adjustments shall be at least one year. For institutions that use a weighting scheme or other methods for the historical observation period, the length of the effective observation period shall be at least one year. The competent authorities may also require an institution to calculate its volatility adjustments using a shorter observation period where, in the competent authorities' judgement, this is justified by a significant upsurge in price volatility; (f) institutions shall update their data sets and calculate volatility adjustments at least once every three months. They shall also reassess their data sets whenever market prices are subject to material changes.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04