• Simplified Framework

    • PRU A6.2.16 PRU A6.2.16

      In applying the simplified framework, an Authorised Person must calculate its General Market Risk requirement for each currency by taking the following steps:

      (a) allocating the individual net positions to one of the time bands in the table below, as follows:
      (i) fixed-rate instruments are allocated to their time bands based upon the residual time to maturity; and
      (ii) floating-rate instruments are allocated to time bands based upon the time remaining to the re-determination of the coupon;
      (b) adding the market values of the individual net positions within each band irrespective of whether they are long or short positions to produce a gross position figure;
      (c) multiplying the amount in (b) by the risk percentage for the relevant maturity band in the table below; and
      (d) adding the calculations in (c) to arrive at the General Market Risk requirement.
       
      Zone Time band Risk percentage
      Coupon of 3% or more Coupon of less than 3%
      A 0≤1month 0≤1month 0.00%
      > 1≤3months > 1≤3months 0.20%
      > 3 ≤ 6 months > 3 ≤ 6 months 0.40%
      > 6 ≤ 12 months > 6 ≤ 12 months 0.70%
      B > 1 ≤ 2 years > 1.0 ≤ 1.9 years 1.25%
      > 2 ≤ 3 years > 1.9 ≤ 2.8 years 1.75%
      > 3 ≤ 4 years > 2.8 ≤ 3.6 years 2.25%
      C > 4 ≤ 5 years > 3.6 ≤ 4.3 years 2.75%
      > 5 ≤ 7 years > 4.3 ≤ 5.7 years 3.25%
      > 7 ≤ 10 years > 5.7 7.3 years 3.75%
      > 10 ≤ 15 years > 7.3 9.3 years 4.50%
      > 15 ≤ 20 years > 9.3 10.6 years 5.25%
      > 20 years > 10.6 ≤ 12.0 years 6.00%
        > 12.0 ≤ 20.0 years 8.00%
        > 20 years 12.50%

      • Guidance

        The risk percentages in the table above are designed to reflect the price sensitivity of the positions to changes in the interest rate.