Related provisions for BIPRU 7.9.25
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Table: Types of CAD 1 modelThis table belongs to BIPRU 7.9.6GOptions risk aggregation modelsInterest rate pre-processing modelsBrief description and eligible instrumentsAnalyse and aggregate options risks for: interest rate options;equityoptions;foreign currencyoptions;commodity options; andCIUoptions.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
If the appropriate regulator 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
(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
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