- Question ID
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2024_7006
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Market risk
- Article
-
325e
- Paragraph
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2
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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n/a
- Name of institution / submitter
-
ECB
- Country of incorporation / residence
-
Germany
- Type of submitter
-
Competent authority
- Subject matter
-
Vega and curvature risk requirements for positions in instruments without exercisable optionality that are sensitive to vega risk factors
- Question
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Should only instruments that are options be subject vega and curvature own funds requirements, or they may apply also to instruments that lack an exercisable optionality?
- Background on the question
-
Article 325e(2) of Regulation (EU) No 575/2013 (CRR) lays down that positions in instruments with optionality are subject to the delta, vega and curvature risk requirements. Conversely, positions in instruments without optionality are subject solely to the delta risk requirement; Article 325e(3) CRR allows banks to extend the treatment to the curvature risk (but not the vega risk) requirement under specific conditions.
The question arises as to how instruments that lack optionality in the sense of an exercisable right for the holder of the option, but which nevertheless exhibit a vega sensitivity and would therefore result in a vega risk capital requirement, should be treated.
- Submission date
- Final publishing date
-
- Final answer
-
The term instruments with optionality includes not only instruments that exhibit a contractual option which can be exercised by the holder of the option, but more broadly also any instruments whose value is sensitive to changes in vega risk factors.
Such instruments may therefore be subject to all of the delta, vega and curvature risk requirements.
- Status
-
Final Q&A
- Answer prepared by
-
Answer prepared by the EBA.
Disclaimer
The Q&A refers to the provisions in force on the day of their publication. The EBA does not systematically review published Q&As following the amendment of legislative acts. Users of the Q&A tool should therefore check the date of publication of the Q&A and whether the provisions referred to in the answer remain the same.