The Historical VaR will use the historically shocked credit spreads to capture the specific spread change excluding the rating migration and default risk which are captured in incremental risk charge (IRC). Historical changes in credit spreads during the most recent one year sample periods will be used to construct the P&L distributions.
The credit spread change of an issue/issuer is decomposed into a systematic component and a debt specific component. The systematic component represents the spread move driven by the economy or overall market/industry. The debt specific component is the spread change directly caused by the change of the issue/issuer’s credit status.
All issues from the same obligor are mapped to the obligor’s rating, which is used as the driver of the systematic component of their total spread change. The total spread of each issue will be modeled using the obligor generic spread and issue specific spread.
Historical Value at Risk
OSF historical var
Zenodo mba swap