Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p73
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
Provision Reference: 
Character Range: 195874–198695

A3.20.

A3.19.2  Method
(1) The position risk amount for Foreign Exchange positions to which the standard method is applied is the sum of:
(a)        the greater of the absolute value of the aggregate of the converted:
(i)         net open long position in foreign currencies; and
(ii)       net open short position in foreign currencies, and
(b)       the absolute value of the converted net open position in gold;
     multiplied by the Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A.
(2) Foreign Exchange Derivative positions which are purchased Options and are In the Money by at least the standard method Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A, are to be converted to a Foreign Exchange Equivalent in accordance with Part A3.21 and included in the net open position in accordance with Part A3.22.
(3) Foreign Exchange Derivative positions which are purchased Options and are not In the Money by at least the standard method Position Risk Factor specified in Table A5.1.7 in Annexure 5 to Schedule 1A, are to be converted to a Foreign Exchange Equivalent in accordance with Part A3.21 and:
(a)        where the resulting currency or gold positions from the option increases the net open position in the currency or gold if included, the position must be included in the net open position; and

        (b)       where the resulting currency or gold positions from the option decreases the net open position in the currency or gold if included, the position must be excluded in the net open position.

Part A3.20 Basic method—Foreign Exchange position risk

A3.20.1  Application
(1) Foreign Exchange Derivative positions which are purchased (long) or written (short) Options must be included in the basic method if not calculated under the standard method set out in Part A3.19.
(2) Foreign Exchange Derivative positions which are written Options must be included in the basic method.

A3.20.2  Method
(1) The position risk amount for a purchased Option is the lesser of:
(a)        the mark-to-market value of the underlying Foreign Exchange position multiplied by the  standard method Position Risk Factor for the underlying position specified in Table A5.1.7 in Annexure 5 to Schedule 1A; and
(b)       the mark-to-market value of the Option,
     where the market value of the Option should be calculated as the current price of the Option multiplied by the underlying Foreign Exchange position.
(2) The position risk amount for a written Option is the mark-to-market value of the underlying Foreign Exchange position multiplied by the standard method Position Risk Factor for the underlying position specified in Table A5.1.7 in Annexure 5 to Schedule 1A reduced by:
(a)        any excess of the exercise value over the current market value of the