Risk-Weighted Assets and Capital Requirements
Effective from Dec 28 2022 - Dec 31 2022
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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); | ||
| (5) | CFIRR = Scaling factor of 1.30; | ||
| (6) | CFEQ = Scaling factor of 3.50; | ||
| (7) | CFCOMM = Scaling factor of 1.90; and | ||
| (8) | CFFX = Scaling factor of 1.20. | ||
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