PRU A4.6.31

The Authorised Person must include the following supervisory delta adjustments in the calculation of the relevant add-on where relevant.

δi Long in the primary risk
Short in the primary risk
Instruments that are
not options or CDO
+1 -1
δi Bought Sold
Call options
Put options
With the following parameters:

Pi = underlying price (spot, forward, average etc.)

Ki = strike price

Ti = latest contractual exercise date of the option

The supervisory volatility σi of an option is specified on the basis of the supervisory factor applicable to the trade in accordance with the table set out in A4.6.34.

δi Purchased (long protection) Sold (short protection)
CDO tranches
With the following parameters:

Ai = attachment point of the CDO tranche

Di = detachment point of the CDO tranche