In the BIS framework, vertical offsets are charges that reflect the modified duration and interest rate shocks for the maturity of each trading position.

Question

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In the BIS (Bank for International Settlements) framework, vertical offsets do not refer to charges reflecting the modified duration and interest rate shocks for the maturity of each trading position. Instead, vertical disallowances (or offsets) relate to the calculation of capital requirements for market risk, considering the imperfect correlation between price movements of different positions within or across risk categories.

In the BIS Framework, Vertical Offsets Are Charges That Reflect