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14.1
The risk-weighted assets for market risk under the simplified standardized approach are determined by multiplying the capital requirements calculated as set out in this chapter by 12.5.
(1)
[14.3] to [14.73] deal with interest rate, equity, foreign exchange (FX) and commodities risk.
(2)
[14.74] to [14.86] set out a number of possible methods for measuring the price risk in options of all kinds.
(3)
The capital requirement under the simplified standardised approach will be the measures of risk obtained from [14.2] to [14.86], summed arithmetically.
14.2
The capital requirement arising from the simplified standardised approach is the simple sum of the recalibrated capital requirements arising from each of the four risk classes – namely interest rate risk, equity risk, FX risk and commodity risk as detailed in the formula below, where:
(1)
CRIRR = capital requirement under [14.3] to [14.40] (interest rate risk), plus additional requirements for option risks from debt instruments (non-delta risks) under [14.74] to [14.86] (treatment of options);
(2)
CREQ = capital requirement under [14.41] to [14.52] (equity risk), plus additional requirements for option risks from equity instruments (non-delta risks) under [14.74] to [14.86] (treatment of options);
(3)
CRFX = capital requirement under [14.53] to [14.62] (FX risk), plus additional requirements for option risks from foreign exchange instruments (non-delta risks) under [14.74] to [14.86] (treatment of options);
(4)
CRCOMM = capital requirement under [14.63] to [14.73] (commodities risk), plus additional requirements for option risks from commodities instruments (non-delta risks) under [14.74] to [14.86] (treatment of options);
