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. |