Article 325r

Description

Delta risk sensitivities

Main content

1. Institutions shall calculate delta general interest rate risk (GIRR) sensitivities as follows:

(a) the sensitivities to risk factors consisting of risk-free rates shall be calculated as follows:

where:

	=	the sensitivities to risk factors consisting of risk-free rates;
r_kt	=	the rate of a risk-free curve k with maturity t;
V_i (.)	=	the pricing function of instrument i; and
x,y	=	risk factors other than rkt in the pricing function V_i;

(b) the sensitivities to risk factors consisting of inflation risk and cross-currency basis shall be calculated as follows:

where:

	=	the sensitivities to risk factors consisting of inflation risk and cross-currency basis;
	=	a vector of m components representing the implied inflation curve or the cross-currency basis curve for a given currency j with m being equal to the number of inflation or cross-currency related variables used in the pricing model of instrument i;
	=	the unity matrix of dimension (1 × m);
V_i(.)	=	the pricing function of the instrument i; and
y, z	=	other variables in the pricing model.

2. Institutions shall calculate the delta credit spread risk sensitivities for all securitisation and non-securitisation positions as follows:

where:

	=	the delta credit spread risk sensitivities for all securitisation and non-securitisation positions;
cs_kt	=	the value of the credit spread rate of an issuer j at maturity t;
V_i (.)	=	the pricing function of instrument i; and
x,y	=	risk factors other than cskt in the pricing function V_i.

3. Institutions shall calculate delta equity risk sensitivities as follows:

(a) the sensitivities to risk factors consisting of equity spot prices shall be calculated as follows:

where:

s_k	=	the sensitivities to risk factors consisting of equity spot prices;
k	=	a specific equity security;
EQ_k	=	the value of the spot price of that equity security;
V_i (.)	=	the pricing function of instrument i; and
x,y	=	risk factors other than EQ_k in the pricing function V_i;

(b) the sensitivities to risk factors consisting of equity repo rates shall be calculated as follows:

where:

	=	the sensitivities to risk factors consisting of equity repo rates;
k	=	the index that denotes the equity;
	=	a vector of m components representing the repo term structure for a specific equity k with m being equal to the number of repo rates corresponding to different maturities used in the pricing model of instrument i;
	=	the unity matrix of dimension (1 · m);
V_i(.)	=	the pricing function of the instrument i; and
x,y	=	risk factors other than in the pricing function V_i.

4. Institutions shall calculate the delta commodity risk sensitivities to each risk factor k as follows:

where:

s_k	=	the delta commodity risk sensitivities;
k	=	a given commodity risk factor;
CTY_k	=	the value of risk factor k;
V_i(.)	=	the market value of instrument i as a function of risk factor k; and
y, z	=	risk factors other than CTYk in the pricing model of instrument i.

5. Institutions shall calculate the delta foreign exchange risk sensitivities to each foreign exchange risk factor k as follows:

where:

s_k	=	the delta foreign exchange risk sensitivities;
k	=	a given foreign exchange risk factor;
FX_k	=	the value of the risk factor;
V_i(.)	=	the market value of instrument i as a function of the risk factor k; and
y, z	=	risk factors other than FXk in the pricing model of instrument i.