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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Recognised Jurisdictions and Funds
Declaration Notices
Financial Markets Tribunal
Rulebook Modules
Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER34/12-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases

Whole SectionText only Print Print Manager Link

(1 version)
Dec 9 2012 onwards

PIB 5 Guidance

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. This chapter addresses the regulatory requirements in respect of managing the Market RiskG exposures of an Authorised FirmG . Market RiskG refers to the risk of incurring losses on positions held by an Authorised FirmG with trading intent, due to adverse changes in market prices or in underlying value drivers. This chapter aims to ensure that an Authorised FirmG engaging in activities exposing the firm to risks associated with potential adverse movements in market prices adopts appropriate and effective risk management practices and holds regulatory capital of the right quality that is also commensurate with the risks involved.
2. This chapter includes requirements that an Authorised FirmG :
a. implement a comprehensive Market RiskG management framework to manage, measure and monitor Market RiskG commensurate with the nature, scale and complexity of the firm's operations; and
b. calculate the Market Risk Capital RequirementG and hold the same.
3. The chapter allows the use of standard pre-defined methodologies for estimating the capital requirement and also allows the use of DFSAG -approved internal models to calculate a firm's Market Risk Capital RequirementG . The chapter covers RulesG for determining Market Risk Capital RequirementG on exposures involving interest rate risk, equity risk, foreign exchange risk, commodities risk, options risk, collective investment fund risk and securities underwriting risk.
4. PIB Appendix 5 provides the detailed requirements, parameters, calculation methodologies and formulae in respect of the primary requirements outlined in PIB chapter 5. PIB Appendix 5 also provides detailed guidance on criteria for approval of internal models for calculation of Market Risk Capital RequirementG , incorporation of incremental risk charges in internal models, if allowed and guidance on the required level of stress testing.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]