Add-On 

Definition

The add-on is a risk markup that takes into account the default risk arising from transactions, the market value of which can increase over a particular period. The add-on is calculated by multiplying the assessment basis by an add-on factor. You store the add-on factor in Customizing by choosing: ® Attributable Amount Determination ® Edit Add-on Factors and entering the add-on factor as a percentage rate depending on the risk sensitivity and the market value change period.

 

 

Structure

Risk factors, such as interest rate risk, exchange rate risk, stock price risk, are assigned to individual transactions by means of the risk sensitivity.

The market value change period describes the period of time that is significant for valuing trading transactions when determining potential market value changes. In Customizing you store how the market value change period is to be determined in the definition of the default risk rule. You can use the data from the transaction or fixed values in the calculation basis. The following values are available for the determination of the market value change period:

·       End of the term of the transaction

The end of the term of the underlying is used in the case of options whose underlying has a definite term (for example, bonds, FRAs, swaps). In the case of options on indexes, shares and foreign exchange, the term is calculated from the end of term of the option.

·       Interest commitment

·       Capital commitment

·       If the calculation basis is to use fixed values, then you must also specify the market value change period in months.

·       If the market value change period is not relevant, then select the value to be ignored.

Integration

The system can find the respective add-on factor for a single transaction in the way described in the table above. This is because the risk sensitivity is assigned to the default risk rule in Customizing (for SEM Banking under … ® Basic Settings ® Assignments ® Assign Risk Sensitivities; for CFM under … Basic Settings ® Assignments to Default Risk Rule ® Assign Risk Sensitivities).and the market value change period is determined by means of the default risk rule.