What is Default risk charge, residual risk add-on?

Example 23.6 (The standardised charge of the book)

Chapter 21’s book, on 23 September 2026. Its GIRR sensitivities (mapping the two bonds’ par-yield sensitivities to the two- and ten-year USD tenors, a simplification) are $+56\,525$ and $-155\,012$ dollars per basis point; with risk weights $1.3\%/\sqrt2$ and $1.1\%/\sqrt2$ and a correlation of 88.7%, the GIRR delta charge is USD 7.83 million. FX delta (EUR and JPY, risk weight $15\%/\sqrt2$, cross-currency correlation 60%) is USD 5.30 million; FX vega, the straddle’s vega times its 8% volatility at a 100% risk weight, USD 14.49 million; FX curvature, from shocking EURUSD by $\pm10.6\%$, USD 39.23 million. In the low correlation scenario the total is USD 68.29 million, the largest of the three (Figure 23.1).