General principles - General market riskGeneral principles - General market risk

General principles - General market risk

1. An ADI that uses the standard method must treat credit derivatives based on a single reference entity in the same way as interest-rate-related derivatives (refer to Attachment B) for the purposes of calculating a general market risk capital charge. Each credit derivative instrument must be broken down into a notional debt instrument, to reflect the interest rate or fee-paying leg (if regular fees are paid under the terms of the contract) and, where applicable, a position in the reference obligation.
2. An ADI must include these positions in the maturity ladder applicable to the currency of the cash flows and report at their market values.