Hi In applying the standard formula calculation I am not entirely clear about scenario vs risk. The core reading says (in fewer words) that SCR for each individual risk = difference between the net asset value (unstressed balance sheet) - net asset value (stressed balance sheet). Is the stressed NAV = NAV after applying a specific scenario? Or is the NAV determined after all stresses for market risk have been applied? I am trying to understand if there is any aggregation of the outcomes once all stresses are applied within the risk module. I hope I have articulated my confusion clearly though Thanks in advance!
This is all explained in Section 3.2 of Chapter 10, including examples of the correlation matrices that are used to aggregate across risks. It explains how each risk is stressed individually, then aggregated first across the risks within a module and then across the modules.
