Counterparty Type 1 Risk Selector

Overview

This calculator isolates the Article 200 Type 1 risk selector.^[1] It converts prepared Type 1 variance and total loss-given-default into the final Type 1 counterparty default capital requirement.

Input Terms

• Type 1 Loss Variance: The prepared variance of the Type 1 loss distribution after Article 201 grouping and variance terms.^[2]
• Total Type 1 LGD: The prepared total loss-given-default across included Type 1 counterparties.^[3][1]

Technical Rationale

Article 200 links the Type 1 amount to the dispersion of default losses around total loss-given-default. The sigma thresholds distinguish diversified Type 1 exposure from portfolios where concentration makes total LGD the binding loss measure.^[1]

The lower Article 201 multiplier applies when sigma is at or below 7% of total LGD.

The higher Article 201 multiplier applies when sigma is above 7% and at or below 20% of total LGD.

Total LGD is the binding Article 200 amount when sigma is above 20% of total LGD.

Important Notes

• This selector is only the final Article 200 risk selection step. The variance and total LGD inputs must be traceable to Type 1 grouping and variance evidence.
• Exposure inputs, single-name grouping, variance, and risk selection should remain traceable as Article 200 and Article 201 evidence.
• The prepared Type 1 amount supports S.25.01.01 standard-formula reporting where counterparty default risk is disclosed.[[ref: qrt-s2501]]