Article 370

An internal model used for calculating own funds requirements for specific risk and an internal model for correlation trading shall meet the following additional requirements: it explains the historical price variation in the portfolio; it captures concentration in terms of magnitude and changes of composition of the portfolio; it is robust to an adverse environment; it is validated through back-testing aimed at assessing whether specific risk is being accurately captured. If the institution performs such back-testing on the basis of relevant sub-portfolios, these shall be chosen in a consistent manner; it captures name-related basis risk and shall in particular be sensitive to material idiosyncratic differences between similar but not identical positions; it captures event risk.

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Source: EUR-Lex (Cellar) · retrieved 2026-09-25 · Text as adopted (Official Journal); later amendments are not incorporated in this text.