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PIB A5.2.22 Guidance

A worked example of the General Market Risk requirement calculation under the Duration Method is as follows:

Zone Modified Duration Individual Net Positions Assumed move in Modified Duration Weighted Individual Net Positions By Timeband By Zone Between Zones
  (years) Long Short (%p.a) (years) Long Short Matched Unmatched Matched Unmatched Matched Matched
A < 1 month $100.00 -$50.00 1.00% 0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $1.30    
1 to 3 months $200.00 -$100.00 1.00% 0.20 $0.40 -$0.20 $0.20 $0.20        
3 to 6 months $300.00 -$200.00 1.00% 0.40 $1.20 -$0.80 $0.80 $0.40        
6 to 12 months $400.00 -$300.00 1.00% 0.70 $2.80 -$2.10 $2.10 $0.70        
                           
B 1 to 1.9 years $100.00 -$200.00 0.90% 1.40 $1.26 -$2.52 $1.26 -$1.26 $0.00 -$5.27 Zone 1&2  
1.9 to 2.8 years $200.00 -$300.00 0.80% 2.20 $3.52 -$5.28 $3.52 -$1.76     $1.30  
2.8 to 3.6 years $300.00 -$400.00 0.75% 3.00 $6.75 -$9.00 $6.75 -$2.25       Zones 1&3
                          $0.00
C 3.6 to 4.3 years $100.00 -$100.00 0.75% 3.65 $2.74 -$2.74 $2.74 $0.00 $4.50 $8.89 Zone 2&3  
4.3 to 5.7 years $200.00 -$200.00 0.70% 4.65 $6.51 -$6.51 $6.51 $0.00     $3.97  
5.7 to 7.3 years $300.00 -$100.00 0.65% 5.80 $11.3 1 -$3.77 $3.77 $7.54        
7.3 to 9.3 years $100.00 -$200.00 0.60% 7.50 $4.50 -$9.00 $4.50 -$4.50        
9.3 to 10.6 years $200.00 -$100 0.60% 9.75 $11.7 0 -$5.85 $5.85 $5.85        
10.6 to 12 years $0.00 $0.00 0.60% 11.00 $0.00 $0.00 $0.00 $0.00        
12 to 20 years $300.00 -$300.00 0.60% 14.50 $26.1 0 -$26.10 $26.10 $0.00        
Over 20 years $0.00 $0.00 0.60% 22.00 $0.00 $0.00 $0.00 $0.00        
                $64.10     $4.92    

Total General Market Risk requirement =

5% ($64.10) + 40% ($0) + 30% ($4.50) + 40% ($5.27) + 100% ($0) + 100% ($4.92) = $11.58

Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]