Related provisions for PERG 2.6.21

BIPRU 7.4.4R01/01/2007

Table: Instruments which result in notional positions

Instrument	See
Forwards, futures, CFDs, synthetic futures and options on a single commodity (unless the firm calculates a PRR on the option under BIPRU 7.6 (Option PRR))	BIPRU 7.4.8R
A commitment to buy or sell a single commodity at an average of spot prices prevailing over some future period	BIPRU 7.4.10R
Forwards, futures, CFDs, synthetic futures and options on a commodity index (unless the firm calculates an PRR on the option under BIPRU 7.6)	BIPRU 7.4.13R - BIPRU 7.4.14R
Commodity swaps	BIPRU 7.4.16R - BIPRU 7.4.17R
A warrant relating to a commodity must be treated as an option on a commodity.

PERG 2.6.20G01/01/2021

The specified investment category of options comprises:444(1) 4options to acquire or dispose of securities or contractually based investments, currency and certain precious metals and options to acquire or dispose of such options. Options to buy or sell other types of commodity will only fall within this specified investment category if they are options to buy or sellfutures, or options to buy or sellcontracts for differences, which are based on other commodities. But options

BIPRU 7.9.7G01/01/2007

Table: Types of CAD 1 model

This table belongs to BIPRU 7.9.6G

	Options risk aggregation models	Interest rate pre-processing models
Brief description and eligible instruments	Analyse and aggregate options risks for: interest rate options; equity options; foreign currency options; commodity options; and CIU options.	May be used to calculate duration weighted positions for: interest rate futures; forward rate agreements (FRAs); forward commitments to buy or sell debt securities; options, swaps or warrants on interest rates or debt securities and options on such swaps; amortising bonds; equity futures, forwards, warrants and options (but only in relation to the interest rate risk inherent in these products); and foreign currency futures, forwards, swaps and options, but only in relation to the interest rate risk inherent in these products.
The output and how it is used in the PRR calculation	Depending on the type of model and the requirements in the CAD 1 model waiver granted, the outputs from an options risk aggregation model are used as an input to the market risk capital requirement calculation.	Depending on the type of model and the requirements in the CAD 1 model waiver granted, the individual sensitivity figures produced by this type of CAD 1 model are either input into the calculation of interest rate PRR under the interest rate duration method (see BIPRU 7.2.63R) or are converted into notional position and input into the calculation of interest rate PRR under the interest rate maturity method (see BIPRU 7.2.59R).

Options risk aggregation models

Interest rate pre-processing models

Brief description and eligible instruments

Analyse and aggregate options risks for:

May be used to calculate duration weighted positions for:

interest rate futures;
forward rate agreements (FRAs);
forward commitments to buy or sell debt securities;
options, swaps or warrants on interest rates or debt securities and options on such swaps;
amortising bonds;
equity futures, forwards, warrants and options (but only in relation to the interest rate risk inherent in these products); and
foreign currency futures, forwards, swaps and options, but only in relation to the interest rate risk inherent in these products.

The output and how it is used in the PRR calculation

Depending on the type of model and the requirements in the CAD 1 model waiver granted, the outputs from an options risk aggregation model are used as an input to the market risk capital requirement calculation.

Depending on the type of model and the requirements in the CAD 1 model waiver granted, the individual sensitivity figures produced by this type of CAD 1 model are either input into the calculation of interest rate PRR under the interest rate duration method (see BIPRU 7.2.63R) or are converted into notional position and input into the calculation of interest rate PRR under the interest rate maturity method (see BIPRU 7.2.59R).

BIPRU 7.9.37G01/01/2007

(1) A different scenario matrix should be set up for each underlying asset type in accordance with this paragraph.(2) For equities (including single equities, baskets and indices) there should be a separate matrix for each national market or non-decomposed basket or non-decomposed multi-national index.(3) For foreign currency products there should be a separate matrix for each currency pair where appropriate.(4) For commodity products there should be a separate matrix for each

BIPRU 7.6.13R01/01/2007

Table: Derived positions

This table belongs to BIPRU 7.6.9R

Underlying	Option (or warrant)	Derived position
Equity	Option (warrant) on a single equity or option on a future/forward on a single equity	A notional position in the actual equity underlying the contract valued at the current market price of the equity.
	Option (warrant) on a basket of equities or option on a future/forward on a basket of equities	A notional position in the actual equities underlying the contract valued at the current market price of the equities.
	Option (warrant) on an equity index or option on a future/forward on an equity index	A notional position in the index underlying the contract valued at the current market price of the index.
Interest rate	Option on an interest rate or an interest rate future/FRA	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the sum of the time to expiry of the contract and the length of the period on which the settlement amount of the contract is calculated valued at the notional amount of the contract.
	Option on an interest rate swap	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the length of the swap valued at the notional principal amount.
	Interest rate cap or floor	A zero coupon zero-specific-risk security in the currency concerned with a maturity equal to the remaining period of the cap or floor valued at the notional amount of the contract.
Debt securities	Option (warrant) on a debt security or option on a future/forward on a debt security	The underlying debt security with a maturity equal to the time to expiry of the option valued as the nominal amount underlying the contract at the current market price of the debt security.
	Option (warrant) on a basket of debt securities or option on a future/forward on a basket of debt securities	A notional position in the actual debt securities underlying the contract valued at the current market price of the debt securities.
	Option (warrant) on an index of debt securities or option on a future/forward on an index of debt securities	A notional position in the index underlying the contract valued at the current market price of the index.
Commodity	Option on a commodity or option on a future/forward on a commodity	An amount equal to the tonnage, barrels or kilos underlying the option with (in the case of a future/forward on a commodity) a maturity equal to the expiry date of the forward or Futures contract underlying the option. In the case of an option on a commodity the maturity of the position falls into Band 1 in the table in BIPRU 7.4.28R (Table: Maturity bands for the maturity ladder approach).
Commodity	Option on a commodity swap	An amount equal to the tonnage, barrels or kilos underlying the option with a maturity equal to the length of the swap valued at the notional principal amount.
CIU (These provisions about CIUs are subject to BIPRU 7.6.35R)	Option (warrant) on a single CIU or option on a future/forward on a single CIU	A notional position in the actual CIU underlying the contract valued at the current market price of the CIU.
	Option (warrant) on a basket of CIUs or option on a future/forward on a basket of CIUs	A notional position in the actual CIUs underlying the contract valued at the current market price of the CIUs.
Gold	Option on gold or option on a future/forward on gold	An amount equal to the troy ounces underlying the option with (in the case of a future/forward on gold) a maturity equal to the expiry date of the forward or futures contract underlying the option.
Currency	Currency option	The amount of the underlying currency that the firm will receive if the option is exercised converted at the spot rate into the currency that the firm will sell if the option is exercised.

SYSC 10A.1.1R01/01/2021

1Subject to the exemptions in SYSC 10A.1.4R, this chapter applies to a firm:(1) that is a:(a) MiFID investment firm3; or(b) full-scope UK AIFM; or(c) small authorised UK AIFM or residual CIS operator; or(d) [deleted]3(e) UCITS management company; or(f) MiFID optional exemption firm, performing activities covered by the exemption; or(g) [deleted]3(h) third country investment firm; or(i) that carries on activities referred to in the general application rule related to:(i) commodity

Related provisions for PERG 2.6.21

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