Related provisions for BIPRU 7.9.25

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BIPRU 7.9.7GRP

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:

May be used to calculate duration weighted positions for:

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 7.9.15GRP
If the FSA grants a CAD 1 model waiver, the waiver direction will specify the particular rule which has been modified, and set out the requirements subject to which the waiver has been granted. These requirements may include:(1) the details of the calculation of PRR;(2) the CAD 1 model waiver methodology to be employed;(3) the products covered by the model (e.g. option type, maturity, currency); and(4) any notification requirements relating to the CAD 1 model waiver.
BIPRU 7.9.37GRP
(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 7.9.43GRP
In using the scenario matrix approach, none of the steps followed will take specific account of a firm's exposure to rho risk. Where a firm can demonstrate that for interest rate-related options the rho sensitivity is effectively included in the delta sensitivities produced, there is no separate capital requirement relating to rho. For all other options except commodity options, a firm should calculate a rho sensitivity ladder by currency using its CAD 1 model and either feed