Standardized measurement method for specific risk.

CFR · 2024-01-01 · US · Title 12

(a) (1) The specific risk add-on for an individual debt or securitization position that represents sold credit protection is capped at the notional amount of the credit derivative contract. The specific risk add-on for an individual debt or securitization position that represents purchased credit protection is capped at the current fair value of the transaction plus the absolute value of the present value of all remaining payments to the protection seller under the transaction. This sum is equal to the value of the protection leg of the transaction. (2) For debt, equity, or securitization positions that are derivatives with linear payoffs, a Board-regulated institution must assign a specific risk- (3) For debt, equity, or securitization positions, a Board-regulated institution may net long and short positions (including derivatives) in identical issues or identical indices. A Board-regulated institution may also net positions in depositary receipts against an opposite position in an identical equity in different markets, provided that the Board-regulated institution includes the costs of conversion. (4) A set of transactions consisting of either a debt position and its credit derivative hedge or a securitization position and its credit derivative hedge has a specific risk add-on of zero if: (i) The debt or securitization position is fully hedged by a total return swap (or similar instrument where there is a matching of swap payments and changes in fair value of the debt or se

official document · source cfr-2024 · id 12:§ 217.210