Appendix 2 | RDP 9409: Default Risk and Derivatives: An Empirical Analysis of Bilateral Netting

RDP 9409: Default Risk and Derivatives: An Empirical Analysis of Bilateral Netting Appendix 2

Marianne Gizycki and Brian Gray

December 1994

Table A2: Correlation Between Average Potential Exposure and the Proposed Add-Ons (R²)
Short/Long:
	Bank 1^a	Bank 2	Bank 3^a	Bank 4	Bank 5^a	Bank 6	Bank 7^a	All − Fed model^a
Basle	−0.0314	−0.0788	0.3254	0.0709	0.0140	−0.2392	0.2410	0.1879
Net RC	−0.3519	0.0836	0.3375	0.5025	−0.2380	−0.2736	0.2065	−0.0110
ABS Net	−0.3517	0.0938	0.3401	0.6314	−0.0872	−0.2722	0.2202	−0.0071
ISDAC1	−0.3393	−0.1362	0.0512	0.2778	−0.3089	−0.2749	0.1325	0.2112
ISDAC2	−0.2513	−0.1207	0.2392	0.2367	−0.1675	−0.2687	0.1950	0.2240
ISDAC3	−0.2112	−0.1140	0.2798	0.2072	−0.1248	−0.2656	0.2109	0.2219
ISDA1	0.1308	−0.0418	0.6933	0.3615	−0.0151	−0.2420	0.3457	0.3293
ISDA2	0.1059	−0.0500	0.6400	0.2836	0.0389	−0.2410	0.3352	0.2960
Maximum	0.0619	−0.0564	0.5263	0.1286	0.0332	−0.2358	0.3262	0.2822
Net	0.1390	−0.0283	0.5634	0.1013	−0.0514	−0.2339	0.3680	0.3930
Weighted	0.1308	−0.0333	0.5924	0.1346	−0.0215	−0.2341	0.3694	0.3823
+/− MTM:
Maximum	0.0700	−0.0562	0.5263	0.1382	0.0129	−0.2358	0.3166	0.1825
Net	0.1670	−0.0273	0.5634	0.1440	−0.0947	−0.2339	0.3460	0.2158
Weighted	0.1381	−0.0371	0.6014	0.1717	−0.035	0.2343	0.3487	0.2152
Time band:
Gross	0.1228	−0.0203	0.5157	0.1884	0.1335	−0.235	0.2263	0.1937
Net	0.2638	0.0527	−0.0974	0.4199	0.0017	−0.2111	0.2711	0.2370
Linear:
Gross	0.1604	−0.0133	0.481	0.1991	0.1358	−0.2385	0.2147	0.2054
Maximum	0.2805	0.0454	0.7157	0.3199	0.1509	−0.2408	0.2855	0.2941
Net	0.3744	0.1332	0.8587	0.3923	0.0918	−0.2484	0.3219	0.3458
Weighted	0.3599	0.1127	0.8598	0.4216	0.1154	−0.2461	0.3211	0.3425
Notes: ^a Estimation by weighted least squares.

Table A3: Correlation Between Average Total Credit Exposure and the Proposed Total Capital Charge (R²)
Short/Long:
	Bank 1^a	Bank 2^a	Bank 3^a	Bank 4^a	Bank 5^a	Bank 6^a	Bank 7^a	All – Fed model^a
Basle	0.9665	0.6054	0.8844	0.5155	0.5649	0.4979	0.7658	0.7304
Basle alternative	0.9659	0.5874	0.8524	0.4785	0.5337	0.4799	0.7437	0.7244
Scenario	0.9681	0.6250	0.8415	0.5338	0.5681	0.5341	0.7673	0.7568
ABS Net	0.9671	0.6599	0.8982	0.4094	0.5687	0.4837	0.7785	0.7195
ISDA1	0.9662	0.6063	0.8813	0.4896	0.5413	0.4972	0.7564	0.7188
ISDA2	0.9663	0.6062	0.8827	0.4979	0.5476	0.4974	0.7589	0.7218
Maximum	0.9663	0.6072	0.8833	0.5121	0.5561	0.4974	0.7629	0.7239
Net	0.9662	0.6087	0.8798	0.5040	0.5463	0.4967	0.7594	0.7171
Weighted	0.9678	0.6312	0.9091	0.5484	0.5909	0.5202	0.7895	0.7343
+/− MTM:
Maximum	0.9663	0.6073	0.8833	0.5118	0.5544	0.4974	0.7618	0.7848
Net	0.9662	0.6088	0.8798	0.5038	0.5429	0.4967	0.7572	0.7836
Weighted	0.9677	0.6294	0.9085	0.5466	0.5858	0.5193	0.7853	0.7934
Time band:
Gross	0.9662	0.6096	0.8771	0.5183	0.5613	0.4909	0.7580	0.7246
Net	0.9661	0.6114	0.8615	0.5133	0.546	0.4923	0.7546	0.7169
Linear:
Gross	0.9844	0.6529	0.2110	0.2087	0.6694	0.6128	0.6981	0.8910
Maximum	0.9886	0.7340	0.3401	0.3617	0.7969	0.6848	0.7936	0.9184
Net	0.9899	0.7815	0.4683	0.4665	0.8442	0.7025	0.8282	0.9224
Weighted	0.9743	0.6957	0.1362	0.2927	0.7877	0.7258	0.6838	0.8499
Notes: ^a Estimation by weighted least squares.