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CA-13.1.1

It is recognised that the measurement of the price risk of options is inherently a difficult task, which is further complicated by the wide diversity of conventional bank licensees' activities in options. The CBB has decided that the following approaches must be adopted to the measurement of options risks:

(a) Conventional bank licensees which solely use purchased options are permitted to use the simplified (carve-out) approach described later in this Chapter; and
(b) Conventional bank licensees which also write options must use either the delta-plus (buffer) approach or the scenario approach, or alternatively use a comprehensive risk management model. The CBB's detailed rules for the recognition and use of internal models are included in Chapter CA-14.
January 2015