Synthetic exposureSynthetic exposure

Synthetic exposure

Where a derivative is held for the purpose of either gaining or reducing exposure to an underlying asset class:

• report the synthetic exposure in column 14 against the underlying asset class sector type;
• report the effective exposure in column 13 which comprises the physical securities, synthetic exposures and the market value of the derivatives; and
• report the corresponding cash offset value (i.e., inverse of the notional principal value of the derivative) in columns 13 and 14 of the relevant strategic sector type under the Cash asset class sector type and Cash Offset Derivatives Investment Asset Class Characteristic 2 Type.

Where a derivative is held for the purposes of hedging currency risk:

• report the market value of the foreign currency (FX) derivative against the asset class sector type the FX derivative is related to in column 13;
• where the market value of the FX derivative is not allocated to a particular asset class sector type report against the ‘Cash’ asset class sector type and Cash Foreign Exchange Derivative Contracts Investment Asset Class Characteristic 2 Type in column 13, report the actual currency hedging level against the investment exposure hedged as a percentage in column 15.
• the notional principal value of the FX derivative does not need to be reported in SRF 550.0 table 2.

Where a derivative is held for the purposes of adjusting interest rate risk:

• for each investment exposure whose modified duration is altered using derivatives, report in column 17 the modified duration for that investment exposure after the derivative adjustment; and
• report the market value of the derivative apportioned on an asset weighted basis against each reported combination of investment exposures whose modified duration is altered by the derivative. The notional principal value of the derivative does not need to be reported in SRF 550 table 2.