Under the Basel 2.5 framework, the total market risk capital charge is composed of the standard Value-at-Risk (VaR) component plus the stressed VaR (sVaR) component.

The formula is: Market Risk Capital = $\max(VaR_{t-1}, m_c \times VaR_{avg}) + \max(sVaR_{t-1}, m_s \times sVaR_{avg})$

From the information provided:

• $VaR_{t-1}$ (most recent 10-day VaR) = $1,000
• $VaR_{avg}$ (average 60-day VaR) = $480
• $m_c$ (multiplier) = 3.9
• $sVaR_{t-1}$ (most stressful 10-day VaR) = $1,100
• $sVaR_{avg}$ (most stressful 60-day average VaR) = $500
• $m_s$ (stressed multiplier) = 3.4

Calculating the general VaR component: $\max(1000, 3.9 \times 480) = \max(1000, 1872) = 1872$

Calculating the stressed VaR component: $\max(1100, 3.4 \times 500) = \max(1100, 1700) = 1700$

Total Capital Charge = $1872 + 1700 = `$3`,572$