Formula to calculate the spread underlying the volatility adjustment
Article 50
For each currency and each country the spread referred to in Article 77d(2) and (4) of Directive 2009/138/EC shall be equal to the following: where: (a) w gov denotes the ratio of the value of government bonds included in the reference portfolio of assets for that currency or country and the value of all the assets included in that reference portfolio; (b) S gov denotes the average currency spread on government bonds included in the reference portfolio of assets for that currency or country; (c) w corp denotes the ratio of the value of bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country and the value of all the assets included in that reference portfolio; (d) S corp denotes the average currency spread on bonds other than government bonds, loans and securitisations included in the reference portfolio of assets for that currency or country. For the purposes of this Article, ‘government bonds’ means exposures to central governments and central banks.