Enter portfolio assumptions
Example data table
| Scenario | Exposure | Confidence | Method | Modeled capital | Final capital | Coverage ratio |
|---|---|---|---|---|---|---|
| Base portfolio | 800,000.00 | 97.50% | Value at Risk | 97,629.71 | 97,629.71 | 184.37% |
| Stress portfolio | 1,500,000.00 | 99.00% | Expected Shortfall | 509,214.70 | 509,214.70 | 62.84% |
| Diversified book | 1,200,000.00 | 99.50% | Expected Shortfall | 129,846.28 | 129,846.28 | 200.24% |
Formula used
1. Effective exposure
Effective Exposure = Exposure × (1 − Recovery Rate)
2. Mean loss over the horizon
Mean Loss = Effective Exposure × Mean Loss Rate × Horizon Days
3. Volatility over the horizon
Volatility Amount = Effective Exposure × Daily Volatility × √Horizon Days
4. Tail measure
VaR = Mean Loss + (Z × Volatility Amount)
ES = Mean Loss + Volatility Amount × φ(Z) ÷ (1 − Confidence)
5. Capital build
Stressed Core = (Tail Measure − Diversification Benefit) × Stress Multiplier
Pre-Buffer Capital = Stressed Core + Liquidity Add-On + Scenario Shock
Final Capital Requirement = max(Modeled Capital, Regulatory Floor)
This page assumes a normal-loss framework for the tail estimate. The confidence level is transformed into a z score, then buffers and floor checks are layered on top.
How to use this calculator
- Enter the total exposure amount you want to protect.
- Set the available capital to compare surplus or shortfall.
- Choose VaR or Expected Shortfall for the tail metric.
- Input mean daily loss and daily volatility percentages.
- Select a confidence level and time horizon in days.
- Adjust recovery, diversification, stress, and scenario assumptions.
- Add liquidity, operational, and minimum floor constraints.
- Submit the form to view the result above the calculator.
- Use the CSV or PDF buttons to save the result set.
FAQs
1. What does this calculator estimate?
It estimates the capital needed to absorb modeled portfolio losses after accounting for confidence level, volatility, stress effects, operational margins, and a minimum floor.
2. Why use Expected Shortfall instead of VaR?
Expected Shortfall measures the average loss beyond the cutoff point, so it better reflects tail severity when extreme outcomes matter more than threshold losses.
3. How does the time horizon affect capital?
Longer horizons raise mean loss linearly and volatility by the square root of time. That combination usually increases the capital requirement.
4. What is the diversification benefit field for?
It reduces unexpected loss to reflect imperfectly correlated exposures. Higher diversification lowers modeled capital, provided the assumption is realistic and justified.
5. What does the regulatory floor do?
The floor sets a minimum requirement as a percentage of exposure. Final capital cannot fall below that amount, even if the model suggests less.
6. Can I use this for scenario testing?
Yes. Adjust volatility, confidence, horizon, stress multiplier, and scenario shock to compare how the requirement changes under tougher assumptions.
7. Is this suitable for official regulatory reporting?
It is best used for internal planning, sensitivity testing, and education. Formal reporting may require institution-specific models, governance, and supervisory rules.
8. What if the coverage ratio is below 100%?
A ratio below 100% means available capital is less than the requirement. The shortfall figure shows how much additional capital may be needed.