Document ID: chunk:federal_register_of_legislation:F2023L00288:reg:5:p12
Version: federal_register_of_legislation:F2023L00288
Segment Type: reg
Provision Reference: reg 5 (pt 12/27)
Character Range: 56519–59464

short underlying (item 1.2).

    (b)          naked positions:

       (i)            purchased put (item 1.3); and

       (ii)         purchased call (item 1.4).

  1.5.  Total capital charge

For columns 1 to 4, item 1.5 Total capital charge is a derived field that sums up the capital charges for all positions within each asset class (interest rates, equities, foreign exchange and commodities). The total charges for each asset class will also be captured under items 1.1.3, 1.2.2, 1.3.2 and 1.4.3, respectively, of the Market risk summary table.

Table 8: Options – Delta-plus method

An ADI that has approval from APRA to use the delta-plus method must complete Table 8.

ADIs using this method must first calculate the delta-equivalent position of each option. The delta-equivalent position is calculated by multiplying the market value of the underlying position by the absolute value of the delta calculated on that position.

Interest rates

For options with interest rate instruments as the underlying, the delta-equivalent position must be included in the positions and capital charge calculations entered in Table 1 and Table 2, in accordance with the instructions applicable to interest rate instruments.

Equities

For options with equity instruments as the underlying, the delta-equivalent position must be incorporated in Table 3 in the appropriate column as part of a gross position for specific risk depending on whether the underlying instrument attracts an eight per cent or two per cent specific risk charge.  The delta-equivalent position must also be included in column 4 Net positions for general market risk of Table 3. The specific risk and general market risk treatment should be in accordance with the instructions for Table 3.

Foreign exchange

For options with foreign exchange or gold[4] as the underlying, the delta-equivalent position must be entered in Table 4, in accordance with the reporting instructions applicable to foreign exchange and gold. Note that for an option over a currency pair not involving AUD, two delta-equivalent positions must be entered into Table 4, one corresponding to the currency bought and the other corresponding to the currency sold.  For currency pairs involving AUD, only one delta-equivalent position is entered in Table 4 for the foreign currency.

Commodities

For options with commodities as the underlying, the delta-equivalent position must be included in either Table 5 or Table 6 (simplified method or maturity ladder method, respectively). This should be reported in accordance with the instructions that apply to commodity risk.

    1.1  Gamma impact

ADIs must calculate the gamma impact of each option as detailed in paragraphs 85 to 87 of Attachment B to APS 116. Total gamma impact is to be reported separately for options over interest rates, equities, foreign exchange and gold, and commodities respectively, in columns 1 to 4 of Table 8.