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CA-4.3.1

The capital requirements for general market risk are designed to capture the risk of loss arising from changes in market interest rates, i.e. the risk of parallel and non-parallel shifts in the yield curve. A choice between two principal methods of measuring the general market risk is permitted, a 'maturity' method and a 'duration' method. In each method, the capital charge is the sum of the following four components:

(a) The net short or long position in the whole trading book;
(b) A small proportion of the matched positions in each time-band (the 'vertical disallowance');
(c) A larger proportion of the matched positions across different time-bands (the 'horizontal disallowance'); and
(d) A net charge for positions in options, where appropriate (see Chapter CA-8).
October 07