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CA-9.9.1

After calculating the derivatives positions, taking account of the permissible offsetting of matched positions, as explained in Section CA-9.8, the capital charges for specific and general market risk for interest rate derivatives are calculated in the same manner as for cash positions, as described earlier in this chapter.

Summary of Treatment of Interest Rate Derivatives

Instrument Specific risk charge* General market risk charge
Exchange-traded futures    
-Government** debt security No Yes, as two positions
-Corporate debt security Yes Yes, as two positions
-Index on interest rates (e.g. LIBOR) No Yes, as two positions
-Index on basket of debt securities Yes Yes, as two positions
OTC forwards    
-Government** debt security No Yes, as two positions
-Corporate debt security Yes Yes, as two positions
-Index on interest rates No Yes, as two positions
FRAs No Yes, as two positions
Swaps    
-Based on inter-bank rates No Yes, as two positions
-Based on Government** bond yields No Yes, as two positions
-Based on corporate bond yields Yes Yes, as two positions
Forward foreign exchange No Yes, as one position in each currency
Options    
-Government** debt security No Either (a) or (b) as below (see chapter CA-13 for a detailed description):
(a) Carve out together with the associated hedging positions, and use:
-simplified approach; or
-scenario analysis; or
-internal models (see chapter CA-14).
(b) General market risk charge according to the delta-plus method (gamma and vega should receive separate capital charges).
-Corporate debt security Yes
-Index on interest rates No
-FRAs, swaps No
* This is the specific risk charge relating to the issuer of the instrument. Under the credit risk rules, there remains a separate capital charge for the counterparty risk.

** As defined in Section CA-9.2.
Amended: January 2012
Amended: April 2011
Apr 08