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PIB A5.7.10

(1) An Authorised Firm may calculate the risk Capital Requirements for positions in Funds in accordance with the methods set out in various sections of PIB chapter 5 applicable to various underlying assets or investments, on assumed positions representing those necessary to replicate the composition and performance of the externally generated index or fixed basket of equities or debt securities, subject to the following conditions:
(a) the Fund's mandate is to replicate the composition and performance of an externally generated index or fixed basket of equities or debt securities; and
(b) a minimum correlation of 0.9 between daily price movements of the Fund and the index or basket of equities or debt securities it tracks, exists over the previous six month period.
(2) Correlation as referred to in (1)(b) means the correlation coefficient between daily returns on the Fund and that on the index or basket of equities or debt securities it tracks.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]