Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p69
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 185470–188142

an Option over a single Debt Instrument, and at the mark-to-market value of the Debt Instrument and its residual maturity; or

(ii)       in the case of an Option over a debt or interest rate index, in the Debt Instrument with the longest residual maturity in the index, at the mark-to-market value of the index; and

(c)        for purchased call Options or written put Options on a Future, a long notional position calculated under paragraph A3.16.3(1)(a) and for purchased put Options or written call Options on a Future, a short notional position calculated under paragraph A3.16.3(1)(b).
(2) For the purposes of subrule (1):
(a)        the notional debt position in the case of an Option over a Swap is:
(i)         long if exercise of the Option leads to the Market Participant receiving fixed rate payments under the Swap; and
(ii)       short if exercise of the Option leads to the Market Participant paying fixed rate payments under the Swap; and
(b)       the value of the notional position in the Debt Instrument will be:
(i)         for an Option over a Debt Instrument, the current market value of that Debt Instrument and the maturity of the notional position in the Debt Instrument will be the term to maturity of the underlying Debt Instrument (and not the term to expiry of the Option);
(ii)       for an Option over an interest rate, the current market value of a zero coupon Government Debt Instrument yielding the interest rate underlying the Option and the maturity of the notional position in the Debt Instrument will be the combined period of the term to expiry of the Option plus the term of the interest rate underlying the Option; and
(iii)     for an Option over a Swap, the principal amount of the underlying Swap, the maturity of the notional position in the Debt Instrument will be the term to maturity of the underlying Swap and the notional position will have a coupon rate equal to the fixed rate of the underlying Swap.

        A3.16.3 Futures, forwards and Forward Rate Agreements and options on Futures
(1) The Debt Equivalent for a Future, forward contract or Forward Rate Agreement is:
(a)        if purchased, a combination of a long position in a notional Debt Instrument with a maturity equal to the combined term of the contract plus the term of the underlying Debt Instrument, and a short position in the notional Debt Instrument with a maturity equal to the term of the contract;
(b)       if sold, a combination of a short position in a notional Debt Instrument with a maturity equal to the combined term of the contract plus the term of the underlying Debt Instrument, and a long position in the notional Debt Instrument with