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Hybrid Instrument Decomposition

Calculate the Allocated Hybrid Exposure instantly.

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Allocated Hybrid Exposure

€10 000 000

1Step 1

Decomposed Total Value

Decomposed Total Value=Separable Debt Component+Separable Equity Component\textit{Decomposed Total Value} = \textit{Separable Debt Component} + \textit{Separable Equity Component}
2Step 2

Decomposition Gap

Decomposition Gap=Hybrid Instrument Market Value−Decomposed Total Value\textit{Decomposition Gap} = \textit{Hybrid Instrument Market Value} - \textit{Decomposed Total Value}
3Step 3

Decomposition Absolute Gap

Decomposition Absolute Gap=max⁡(Decomposition Gap,1×Decomposition Gap)\textit{Decomposition Absolute Gap} = \max(\textit{Decomposition Gap}, 1 \times \textit{Decomposition Gap})
4Step 4

Decomposition Breach Flag (0/1)

Decomposition Breach Flag (0/1)=gte⁡(Decomposition Absolute Gap,Decomposition Reconciliation Tolerance)\textit{Decomposition Breach Flag (0/1)} = \operatorname{gte}\left(\textit{Decomposition Absolute Gap}, \textit{Decomposition Reconciliation Tolerance}\right)
5Step 5

Fallback Debt Exposure

Fallback Debt Exposure=Hybrid Instrument Market Value×1−Discrete Components Separable (0/1)×Debt Characteristics Predominate (0/1)\textit{Fallback Debt Exposure} = \textit{Hybrid Instrument Market Value} \times 1 - \textit{Discrete Components Separable (0/1)} \times \textit{Debt Characteristics Predominate (0/1)}
6Step 6

Fallback Equity Exposure

Fallback Equity Exposure=Hybrid Instrument Market Value×1−Discrete Components Separable (0/1)×Equity Characteristics Predominate (0/1)\textit{Fallback Equity Exposure} = \textit{Hybrid Instrument Market Value} \times 1 - \textit{Discrete Components Separable (0/1)} \times \textit{Equity Characteristics Predominate (0/1)}
7Step 7

Debt Exposure

Debt Exposure=Separable Debt Component×Discrete Components Separable (0/1)+Fallback Debt Exposure\textit{Debt Exposure} = \textit{Separable Debt Component} \times \textit{Discrete Components Separable (0/1)} + \textit{Fallback Debt Exposure}
8Step 8

Equity Exposure

Equity Exposure=Separable Equity Component×Discrete Components Separable (0/1)+Fallback Equity Exposure\textit{Equity Exposure} = \textit{Separable Equity Component} \times \textit{Discrete Components Separable (0/1)} + \textit{Fallback Equity Exposure}
9Step 9

Unallocated Exposure

Unallocated Exposure=max⁡(0,Hybrid Instrument Market Value−Debt Exposure+Equity Exposure)\textit{Unallocated Exposure} = \max(0, \textit{Hybrid Instrument Market Value} - \textit{Debt Exposure} + \textit{Equity Exposure})
10Step 10

Hybrid Governance Gate Flag (0/1)

Hybrid Governance Gate Flag (0/1)=min⁡(Classification Evidence Available (0/1),1−Decomposition Breach Flag (0/1))\textit{Hybrid Governance Gate Flag (0/1)} = \min(\textit{Classification Evidence Available (0/1)}, 1 - \textit{Decomposition Breach Flag (0/1)})
11Step 11

Hybrid Governance Breach Flag (0/1)

Hybrid Governance Breach Flag (0/1)=max⁡(1−Hybrid Governance Gate Flag (0/1),gte⁡(Unallocated Exposure,Decomposition Reconciliation Tolerance))\textit{Hybrid Governance Breach Flag (0/1)} = \max(1 - \textit{Hybrid Governance Gate Flag (0/1)}, \operatorname{gte}\left(\textit{Unallocated Exposure}, \textit{Decomposition Reconciliation Tolerance}\right))
12Step 12

Allocated Hybrid Exposure

Allocated Hybrid Exposure=Debt Exposure+Equity Exposure\textit{Allocated Hybrid Exposure} = \textit{Debt Exposure} + \textit{Equity Exposure}

Understand the Hybrid Instrument Decomposition

Overview

This calculator implements the EIOPA 2026 market-risk preprocessing control for assets with both debt and equity characteristics.[1] It splits separable components into debt and equity exposure bases and, where decomposition is not possible, applies a fallback based on predominant economic substance.

Input Terms

  • Hybrid Instrument Market Value: The total value of the instrument being classified.
  • Separable Debt / Equity Components: Component values used where the instrument can be decomposed into discrete parts.
  • Decomposition Possible Flag: Indicates whether separate component treatment is available.
  • Economic Substance Flags: Fallback classification where decomposition is not possible.

Technical Rationale

EIOPA Guideline 3 requires undertakings to consider both debt and equity characteristics when determining the standard-formula modules and sub-modules that apply. Where the asset can be considered as a composite of discrete components, relevant stresses should be applied separately. Where that is not possible, the classification should follow the predominant economic substance. This calculator prepares those downstream exposure buckets without calculating the final SCR.

Important Notes

  • Latest EIOPA update: This page reflects the revised EIOPA Guidelines on market and counterparty risk exposures published on 13 February 2026.
  • Atomistic output: The primary output is allocated hybrid exposure; debt and equity outputs feed spread, interest-rate, or equity risk calculators as applicable.
  • Reconciliation control: A decomposition breach means the component values do not reconcile to the total market value within tolerance.
  • Fallback discipline: If decomposition is not possible, only the predominant economic substance fallback should be used.

Sources

  1. EIOPA 2026 Guidelines on market and counterparty risk exposures - EIOPA

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.