• General Steps For Calculating The Add-On

    • PRU A4.6.28

      For each transaction, the Authorised Person must identify the primary risk factor or factors and attribute the transaction to one or more of the five asset classes: interest rate, foreign exchange, credit, equity or commodity.

    • PRU A4.6.29 PRU A4.6.29

      The Authorised Person must determine the add-on for each asset class in accordance with the asset-class-specific formulae set out in A4.6.35A4.6.58.

      • Guidance

        Most derivative transactions have one primary risk driver, defined by the reference underlying instrument (e.g. an interest rate curve for an interest rate swap, a reference entity for a credit default swap, a foreign exchange rate for an FX call option etc.).