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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   Either (a) or (b) as below (see chapter CA-13 for a detailed description):
- Government** debt security
- Corporate debt security
- Index on interest rates
- FRAs, swaps
 No

Yes

No

No
(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).
* 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.
January 2015