Guidance

A worked example of the General Market Risk requirement calculation under the Duration Method is as follows:

Zone

Time band
(m = months, y = years)

Aggregate positions
per time band ($)
Assumed move
in interest rates
(% pa)
Modified
duration
(years)
Aggregate positions per time band – weighted ($)
(M = matched, U = unmatched)
  By time band By zone Between zones
Long Short Long Short M U M U M U
A ≤ 1m 100 -50 1.00% 0.00 0.00 0.00 0.00 0.00 0.00 1.30    
> 1 and ≤ 3m 200 -100 1.00% 0.20 0.40 -0.20 0.20 0.20        
> 3 and ≤ 6 m 300 -200 0.40% 1.00 0.40 1.20 -0.80 0.40        
> 6 and ≤ 12 m 400 -300 1.00% 0.70 2.80 -2.10 2.10 0.70        
                         
B > 1.0 and ≤ 1.9 y 100 -200 0.90% 1.40 1.26 -2.52 1.26 -1.26 0.00 -5.27 Zones A&B
1.30
 
> 1 and ≤ 3m 200 -100 1.00% 0.20 0.40 -0.20 0.20 0.20      
> 2.8 and ≤ 3.6 y 300 -400 0.75% 3.00 6.75 -9.00 6.75 -2.25       Zones A&C 0.00
                       
C > 3.6 and ≤ 4.3 y 100 -100 0.75% 3.65 2.74 -2.74 2.74 0.00 4.50 8.89 Zones B&C
3.97
 
> 4.3 and ≤ 5.7 y 200 -200 0.70% 4.65 6.51 -6.51 6.51 0.00      
> 5.7 and ≤ 7.3 y 300 -100 0.65% 5.80 11.31 -3.77 3.77 7.54        
> 7.3 and ≤ 9.3 y 100 -200 0.60% 7.50 4.50 -9.00 4.50 -4.50        
> 9.3 and ≤ 10.6 y 200 -100 0.60% 9.75 11.70 -5.85 5.85 5.85        
> 10.6 and ≤ 12.0 y 0 0 0.60% 11.00 0.00 0.00 0.00 0.00        
> 12 and ≤ 20 y 300 -300 0.60% 14.50 26.10 -26.10 26.10 0.00        
> 20 y 0 0 0.60% 22.00 0.00 0.00 0.00 0.00        
                         
Total                 64     4.92  

Total General Market Risk requirement = 5% ($64.10) + 40% ($0) + 30% ($4.50) + 40% ($5.27) + 100% ($0) + 100% ($4.92) = $11.58