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I was going through CCAR-2018-severely adverse market shocks file and under the tab: Equity by Geography, I found these shocks.

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I have two questions:

1) Whether the shocks to Vol points are in % or bps. For example, For Australia, bump to 1M vol is 16.2, so is this 16.2% of original Vol or it is a bump of 16.2 basis points to the original vol.

2) This is to just ensure that my understanding is correct: Shocks to Vol points are simultaneous shock or parallel shock?

I think that we are providing simultaneous shocks to the vol surface and finding the PnL.

Can anyone please share their knowledge on this

It will be good if you can provide a source from where I can find these type of details.

Thanks

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"1) Whether the shocks to Vol points are in % or bps. For example, for Australia bump to 1M vol is 16.2, so is this 16.2% of original Vol or it is a bump of 16.2 basis points to the original vol?"

The shocks are in percentage points: for example if Australian 1M vol is 21.0%, the CCAR shocked 1M vol will be 21.0% + 16.2% = 37.2%.

"2) This is to just ensure that my understanding is correct: Shocks to Vol points are simultaneous shock or parallel shock?"

Shocks are applied simultaneously to the whole curve, each tenor in the curve being shocked by the appropriate magnitude: for example, if your curve has 1M, 6M and 1Y tenors with vols 21.0%, 27.5% and 31.5% respectively, the CCAR shocked vol curve will be 37.2%, 46.3% and 52.0% respectively (+16.2ps, +18.8ps and +20.5ps).

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  • $\begingroup$ Thanks for the info. Is there some reference or official sources in your knowledge from where we can get more details on these things? $\endgroup$ – User Jul 6 '18 at 11:01
  • $\begingroup$ I can't point to any specific source, my knowledge on this comes from my job. $\endgroup$ – Daneel Olivaw Jul 6 '18 at 11:13

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