Related provisions for BIPRU 7.3.6
Table: Appropriate PRR calculation for an option or warrant
This table belongs to BIPRU 7.6.3R
Option type (see BIPRU 7.6.18R) or warrant 
PRR calculation 
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 position risk adjustment (see BIPRU 7.6.7R and BIPRU 7.6.8R) 
Calculate either an option PRR, or the most appropriate to the underlying position of:

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

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). 
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 

In the money by more than the position risk adjustment 
In the money by less than the position risk adjustment 

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 
{(position risk adjustment100%) 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 

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. 

Z means 
The option hedging method is not permitted; the option standard method must be used. 
Table: Instruments which result in notional positions
This table belongs to BIPRU 7.3.2R(2)
Instrument 
See 

Depository receipts 

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 

(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 

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

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). 
Table: Instruments which result in notional positions
This table belongs to BIPRU 7.2.3R(2)
Instrument 
See 
Futures, forwards or synthetic futures on debt securities 

Futures, forwards or synthetic futures on debt indices or baskets 

Interest rate futures or forward rate agreements (FRAs) 

Interest rate swaps or foreign currencyswaps 

Deferred start interest rate swaps or foreign currencyswaps 

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)) 

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

Cash borrowings or deposits 

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)) 

Dual currency bonds 

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) 

Credit derivatives 

Table: Types of CAD 1 model
This table belongs to BIPRU 7.9.6G
Options risk aggregation models 
Interest rate preprocessing 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). 