Financial Sector (Collection of Data) (reporting standard) determination No. 75 of 2006 - Reporting Standard GRS 160.0 (2007) Derivative Activity and Risk Charge
Mark to Market valueMark to Market value
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Mark to Market value
Record the aggregate mark to market value of the derivative exposure/position separated into net long or net short positions, for each of the items listed. Amount is to be rounded to thousands of Australian dollars.
Mark to market value (or replacement cost) represents the difference between:
- the price of entering into a new contract to replace the original contract and
- the price of the original contract excluding transaction costs.
Potential exposure add-on factors %
The potential exposure add-on factors as specified in GPS 110 Capital Adequacy are:
| Residual Maturity | Interest Rate Contracts | Foreign Exchange & Gold Contracts | Equity Contracts | Precious Metal Contracts (except gold) | Other Contracts |
|---|---|---|---|---|---|
| Less than 1 yr | Nil | 1.0% | 6.0% | 7.0% | 10.0% |
| 1 year to less than 5 yrs | 0.5% | 5.0% | 8.0% | 7.0% | 12.0% |
| More than 5 yrs | 1.5% | 7.5% | 10.0% | 8.0% | 15.0% |
Asset equivalent
Do not enter a value in this column. The form automatically calculates the asset equivalent value of the derivative exposure. This is calculated based on the Prescribed Method set out in GPS 110 Capital Adequacy, and is the sum of the:
- Positive mark-to-market value (or replacement cost) of the derivative position (refer below); plus
- A potential exposure add-on.
Current mark-to-market value of the derivative position
The current mark-to-market value of a derivative is only applicable where the position has a positive replacement value to the insurer. If the current mark-to-market value of the position is negative or zero, the value is not included in the calculation, as the calculation of the asset equivalent amount is trying to capture the credit risk value of the derivative position to the insurer.
A potential exposure add-on
The potential exposure add-on for a derivative position is determined by multiplying the notional principal amount of the derivative contract by the appropriate credit conversion factors outlined in the table above. This component of the calculation is required for all derivatives regardless of whether the derivative contract has a positive, zero or negative mark-to-market value.