CA-10.5.2
The following guidelines will apply to the calculation of positions in different categories of equity
(a) Futures and forward contracts relating to individual equities should, in principle, be included in the calculation at current market prices;
(b) Futures relating to stock indices should be included in the calculation, at the marked-to-market value of the notional underlying equity portfolio, i.e. as a single position based on the sum of the current market values of the underlying instruments;
(c) Equity swaps are treated as two notional positions. For example, an equity swap in which a bank is receiving an amount based on the change in value of one particular equity or stock index, and paying a different index is treated as a long position in the former and a short position in the latter. Where one of the swap legs involves receiving/paying a fixed or floating interest rate, that exposure should be slotted into the appropriate time-band for interest rate related instruments as set out in chapter CA-9. The stock index leg should be covered by the equity treatment as set out in this chapter; and
(d) Equity options and stock index options are either "carved out" together with the associated underlying instruments, or are incorporated in the general market risk measurement framework, described in this chapter, based on the delta-plus method. The treatment of options, being a complex issue, is dealt with in detail in chapter CA-13.
Amended: April 2011
Apr 08
Apr 08