(a) 'gap risk' arises from the term structure of banking book instruments, and describes the risk arising from the timing of instruments' rate changes. The extent of gap risk depends on whether changes to the term structure of rates of return occur consistently across the yield curve (parallel risk) or differentially by period (non-parallel risk);

(b) 'basis risk 'describes the impact of relative changes in rates of return for financial instruments that have similar tenors but are priced using different rate of return indices; and

(c) 'option risk' arises from hedge positions or from optional elements embedded in the bank's assets, liabilities and off-balance sheet items, where the bank or its customer can alter the level and timing of their cash flows.