Related provisions for BIPRU 7.6.2
Table: Appropriate treatment for equities, debt securities or currencies hedging options
This table belongs to BIPRU 7.6.24R
Hedge |
PRR calculation for the hedge |
Limits (if hedging method is used) |
Naked position |
The equity must be treated in either BIPRU 7.3 (equity PRR) or the option hedging method (see the table in BIPRU 7.6.27R) |
The option hedging method must only be used up to the amount of the hedge that matches the notional amount underlying the option or warrant |
To the extent that the amount of the hedge (or option or warrant) exceeds the notional amount underlying the option or warrant (or hedge), a firm must apply an equity PRR, interest rate PRR or foreign currencyPRR (or the option standard method) |
|
The debt security must be treated in BIPRU 7.2 (interest rate PRR) or the option hedging method (see the table in BIPRU 7.6.27R) |
As for the first row |
As for the first row |
|
Gold (hedging a gold option) |
The gold must be treated in either BIPRU 7.5 (Foreign currency PRR) or the option hedging method (see the table in BIPRU 7.6.27R) |
As for the first row |
As for the first row |
A currency or currencies (hedging a currency option) |
The currency must be treated in either BIPRU 7.5 (Foreign currency PRR) or the option hedging method (see the table in BIPRU 7.6.28R) |
As for the first row |
As for the first row |
Table: The hedging method of calculating the PRR (equities, debt securities and gold)
This table belongs to BIPRU 7.6.24R(1) - (3)
PRR |
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In the money by more than the position risk adjustment |
In the money by less than the position risk adjustment |
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Long in security or gold |
Long put |
Zero |
Wp |
X |
Short call |
Y |
Y |
Z |
|
Short in security or gold |
Long call |
Zero |
Wc |
X |
Short put |
Y |
Y |
Z |
|
Where: |
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Wp means |
{(position risk adjustment-100%) x The underlying position valued at strike price} |
+ |
The market value of the underlying position |
|
Wc means |
{(100% +position risk adjustment x The underlying position valued at strike price} |
- |
The market value of the underlying position |
|
X means |
The market value of the underlying position multiplied by the appropriate position risk adjustment |
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Y means |
The market value of the underlying position multiplied by the appropriate position risk adjustment. This result may be reduced by the market value of the option or warrant, subject to a maximum reduction to zero. |
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Z means |
The option hedging method is not permitted; the option standard method must be used. |
Table: Interest rate risk on other futures, forwards, options and swaps
This table belongs to BIPRU 7.2.34R.
Instrument |
Notional positions |
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a long position denominated in the currency purchased |
and |
a short position denominated in the currency sold |
|
a long position if the forward or future involves an actual (or notional) sale of gold |
or |
a short position if the forward or future involves an actual (or notional) purchase of gold |
|
Equityforward or future, or option (unless the interest rate PRR is calculated under the basic interest rate PRR calculation in BIPRU 7.3) |
A long position if the contract involves an actual (or notional) sale of the underlying equity |
or |
A short position if the contract involves an actual (or notional) purchase of the underlying equity |