Module: | MODULE B: RISK MANAGEMENT
Q311: Calculate the total market risk capital charge under the Standardised Duration Approach (SDA) for a bank's bond portfolio, given the following data:
1. Specific Risk capital charge calculated: ₹ 15 Crore.
2. General Market Risk capital charge calculated: ₹ 25 Crore.
2. General Market Risk capital charge calculated: ₹ 25 Crore.
✅ Correct Answer: B
The correct answer is B (₹ 40 Crore). Under the Standardised Duration Approach (SDA) for Market Risk, the total capital charge is explicitly the simple sum of two distinct components.
The first component is the Specific Risk charge, which protects against an adverse movement in the price of an individual security due to factors related to the individual issuer (₹ 15 Crore). The second component is the General Market Risk charge, which protects against the risk of loss arising from changes in the overall interest rates in the market (₹ 25 Crore). Simply adding them together: 15 + 25 = ₹ 40 Crore.
Options A, C, and D represent incorrect mathematical operations or single components.
The first component is the Specific Risk charge, which protects against an adverse movement in the price of an individual security due to factors related to the individual issuer (₹ 15 Crore). The second component is the General Market Risk charge, which protects against the risk of loss arising from changes in the overall interest rates in the market (₹ 25 Crore). Simply adding them together: 15 + 25 = ₹ 40 Crore.
Options A, C, and D represent incorrect mathematical operations or single components.