Document ID: chunk:federal_register_of_legislation:F2024C01107:body:0:p68
Version: federal_register_of_legislation:F2024C01107
Segment Type: other
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Character Range: 183100–185696

Factor for the underlying position specified in Table A5.1.2 in Annexure 5 to Schedule 1A reduced by:

(a)        any excess of the exercise value over the current market value of the underlying position in the case of a call Option, but limited to nil if it would otherwise be negative; or

(b)       any excess of the current market value of the underlying position over the exercise value in the case of a put Option, but limited to nil if it would otherwise be negative.

Part A3.16 Calculation of Debt Equivalent positions—Debt position risk

A3.16.1  Swaps

The Debt Equivalent for a Swap is two notional positions, one for each leg of the Swap under which:

(a)        there is a notional long position in a Debt Instrument or Debt Derivative on the leg of the Swap on which interest is received with a maturity equal to either the next interest reset date for a floating rate payment or the maturity of the Swap for a fixed rate payment; and

(b)       there is a notional short position in a Debt Instrument or Debt Derivative on the leg of the Swap on which interest is paid with a maturity equal to either the next interest reset date for a floating rate payment or the maturity of the Swap for a fixed rate payment.

If one of the legs of the Swap provides for payment or receipt based on some reference to an Equity or Equity Derivative, the position risk amount for that leg of the Swap should be assessed in accordance with Parts A3.1 to A3.9.

If one of the legs of the Swap provides for payment or receipt based on some reference to a Commodity or Commodity Derivative, the position risk amount for that leg of the Swap should be assessed in accordance with Part A3.23 to A3.28.

A3.16.2  Options

(1) The Debt Equivalent for an Option is:

(a)        for purchased call Options or written put Options, a long notional position:

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

(b)       for purchased put Options or written call Options, a short notional position:

(i)         in the underlying Debt Instrument, in the case of 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