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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER33/02-19]
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Dec 9 2012 onwards

PIB A5.6.5



Whole Section PDF

The definitive version of DFSA handbook text is the PDF version as that is the text of the instrument as made and published by the DFSA.

To view past versions of this module in PDF format, please visit the Archive.

(1) An Authorised FirmG that writes or purchases options may include DeltaG -weighted options positions within the standardised methodology set out in sections PIB A5.2 to PIB A5.5. Such options must be reported as a position equal to the market value of the underlying instrument multiplied by the DeltaG .
(2) An Authorised FirmG is also required to measure and VegaG risks in order to calculate the total capital charge. These sensitivities will be calculated according to an approved proprietary options pricing model.
(3) DeltaG -weighted positions with debt SecuritiesG or interest rates as the underlying instrument must be inserted into the interest rate timebands, as set out in PIB section A5.2. A two-legged approach must be used as for other derivatives, requiring one entry at the time the underlying instrument takes effect and a second at the time the underlying instrument matures. Floating rate instruments with caps or floors must be treated as a combination of floating rate SecuritiesG and a series of European-style options.
(4) The capital charge for options with equities as the underlying instrument must also be based on the DeltaG -weighted positions which must be incorporated in the measure of Equity Risk Capital RequirementG described in PIB section A5.3. For purposes of this calculation, each national market must be treated as a separate underlying instrument.
(5) The capital charge for options on commodities, foreign currency (including gold) positions must be based on the method set out in PIB section 5.8. For DeltaG risk, the net DeltaG -based equivalent of the commodities, foreign currency including gold) options must be incorporated into the measurement of the ExposureG for the respective currency (or gold) position.
(6) Individual net DeltaG positions as described above must be treated as the underlying instrument in accordance with sections PIB A5.4 to PIB A5.5.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]