Requirements for managing market risk.

CFR · 2024-01-01 · US · Title 12

(a) (i) Marking covered positions to market or to model on a daily basis; (ii) Daily assessment of the Enterprise's ability to hedge position and portfolio risks, and of the extent of market liquidity; (iii) Establishment and daily monitoring of limits on covered positions by a risk control unit independent of the business unit; (iv) Routine monitoring by senior management of information described in paragraphs (a)(1)(i) through (iii) of this section; (v) At least annual reassessment of established limits on positions by senior management; and (vi) At least annual assessments by qualified personnel of the quality of market inputs to the valuation process, the soundness of key assumptions, the reliability of parameter estimation in pricing models, and the stability and accuracy of model calibration under alternative market scenarios. (2) (b) (2) An Enterprise must meet all of the requirements of this section on an ongoing basis. The Enterprise must promptly notify FHFA when: (i) The Enterprise plans to extend the use of a model to an additional business line or product type; (ii) The Enterprise makes any change to an internal model that would result in a material change in the Enterprise's risk-weighted asset amount for a portfolio of covered positions; or (iii) The Enterprise makes any material change to its modeling assumptions. (3) FHFA may determine an appropriate capital requirement for the covered positions to which a model would apply, if FHFA determines that the model

official document · source cfr-2024 · id 12:§ 1240.203