Related provisions for BIPRU 7.3.6

American option, European option, Bermudan option, Asian option or warrant for which the in the money percentage (see BIPRU 7.6.6R) is equal to or greater than the appropriate PRA (see BIPRU 7.6.7R and BIPRU 7.6.8R)

Calculate either an option PRR, or the most appropriate to the underlying position of:

• an equity PRR; or
• an interest rate PRR; or
• a commodity PRR; or
• a foreign currency PRR; or
• a collective investment undertaking PRR.

American option, European option, Bermudan option, Asian option or warrant:

• for which the in the money percentage (see BIPRU 7.6.6R) is less than the appropriate PRA (see BIPRU 7.6.7R and BIPRU 7.6.8R); or
• that is at the money; or
• that is out of the money.

Calculate an option PRR

All other types of option listed in BIPRU 7.6.18R (regardless of whether in the money, at the money or out of the money).

An equity (hedging an option or warrant)

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)

A debt security (hedging an option or warrant)

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

Option or warrantposition

In the money by more than the PRA

In the money by less than the PRA

Out of the money or at the money

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:

Wp means

{(PRA-100%) x The underlying position valued at strike price}

+

The market value of the underlying position

Wc means

{(100% +PRA 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 PRA

Y means

The market value of the underlying position multiplied by the appropriate PRA. This result may be reduced by the market value of the option or warrant, subject to a maximum reduction to zero.

Z means

The option hedging method is not permitted; the option standard method must be used.

Depository receipts

BIPRU 7.3.12R

Convertibles where:

(a) the convertible is trading at a market price of less than 110% of the underlying equity; and the first date at which conversion can take place is less than three months ahead, or the next such date (where the first has passed) is less than a year ahead; or

BIPRU 7.3.13R

(b) the conditions in (a) are not met but the firm includes the convertible in its equity PRR calculation rather than including it in its interest rate PRR calculation set out in BIPRU 7.2 (Interest rate PRR).

Futures, forwards, CFDs and synthetic futures on a single equity

BIPRU 7.3.14R

Futures, forwards, CFDs and synthetic futures on a basket of equities or equity index

BIPRU 7.3.15R

equity legs of an equityswap

BIPRU 7.3.19R

Options or warrants on a single equity, an equityfuture, a basket of equities or an equity index (unless the firm calculates a PRR on the option or warrant under BIPRU 7.6).

BIPRU 7.3.21R

Futures, forwards or synthetic futures on debt securities

BIPRU 7.2.13 R

Futures, forwards or synthetic futures on debt indices or baskets

BIPRU 7.2.14R

Interest rate futures or forward rate agreements (FRAs)

BIPRU 7.2.18 R

Interest rate swaps or foreign currencyswaps

BIPRU 7.2.21R

Deferred start interest rate swaps or foreign currencyswaps

BIPRU 7.2.24R

The interest rate leg of an equityswap (unless the firm calculates the interest rate PRR on the instrument using the basic interest rate PRR calculation in BIPRU 7.3 (Equity PRR and basic interest rate PRR for equity derivatives))

BIPRU 7.2.27R

The cash leg of a repurchase agreement or a reverse repurchase agreement

BIPRU 7.2.30R

Cash borrowings or deposits

BIPRU 7.2.31 R

Options on a debt security, a basket of debt securities, a debt security index, an interest rate or an interest rate future or swap (including an option on a future on a debt security) (unless the firm calculates a PRR on the option under BIPRU 7.6 (Option PRR))

BIPRU 7.2.32R

Dual currency bonds

BIPRU 7.2.33R

Foreign currency futures or forwards

BIPRU 7.2.34R

Gold futures or forwards

BIPRU 7.2.34R

Forwards, futures or options (except cliquets) on an equity, basket of equities or equity index (unless the firm calculates the interest rate PRR on the instrument using the basic interest rate PRR calculation in BIPRU 7.3)

BIPRU 7.2.34R

Credit derivatives

BIPRU 7.11

A warrant must be treated in the same way as an option