CA-9.3 CA-9.3 General Market Risk Calculation
CA-9.3.1
The capital requirements for general
market risk are designed to capture the risk of loss arising from changes in market interest rates, i.e. the risk of parallel and non-parallel shifts in theyield curve . A choice between two principal methods of measuring the generalmarket risk is permitted, a "maturity" method and a "duration" method. In each method, the capital charge is the sum of the following four components:(a) The net short or long position in the whole trading book;(b) A small proportion of the matched positions in each time-band (the "vertical disallowance");(c) A larger proportion of the matched positions across different time-bands (the "horizontal disallowance"); and(d) A net charge for positions in options, where appropriate (see Chapter CA-13).January 2015CA-9.3.2
Separate maturity ladders must be used for each currency and capital charges must be calculated for each currency separately and then summed, by applying the prevailing foreign exchange spot rates, with no off-setting between positions of opposite sign.
January 2015CA-9.3.3
In the case of those currencies in which the value and volume of business is insignificant, separate maturity ladders for each currency are not required. Instead, the
conventional bank licensee may construct a single maturity ladder and slot, within each appropriate time-band, the net long or short position for each currency. However, these individual net positions are to be summed within each time-band, irrespective of whether they are long or short positions, to arrive at the gross position figure for the time-band.January 2015CA-9.3.4
A combination of the two methods (referred to under Paragraph CA-9.3.1) is not permitted.
January 2015
