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Listed Derivatives RM: PRiME (Intercommodity Spread (ICS) Credit (Delta…
Listed Derivatives RM:
PRiME
SPAN
risk analysis
Risk Arrays
Price Scan Range
C.C.
Same underlying
Scan Risk
Scan Points
The different risk scenarios
that comprise the
risk array calculations
Intermonth
Spread Charge
offset for spread
between pdt within
the same C.C. but of
different expiration
evaluate the basis risk
Composite delta = position x delta x scaling factor
Find the smallest absolute composite delta for each C.C.
Intracommodity charge rate = result from (2.) x charge rate
Intercommodity
Spread (ICS) Credit
Side A or B
A versus B
= Long versus Short
Delta per Spread Ratio
no. of contracts
required to form
the spread
to make it Delta neutral
=1/Beta
Risk reducing (margin offset)
aspects of portfolios containing
off-setting positions in
highly correlated instruments
\[ICS=R^2 - haircut\]
Total margin requirement
= (Ratio x CNH Margin Level+USD Margin Level)
x (1-actual ICS rate)
Extra
No. of spread formed
= Min [Composite Delta of Leg 1/Ratio of Leg 1;
Composite Delta of Leg 2/Ratio of Leg 2]
for each C.C.
Weighted
Price Risk
(WPR)
WPR
= Max [Price Risk/ ABS(Composite Delta); 0]
Price Risk
= (Scan Risk Scenario Loss +
Paired Scenario Loss) / 2 - Time Risk
Spot month
charge
Short option
premium
Commodity Risk
= Scan Risk + IMS Charge +
Spot Month Charge or
Physical Delivery Contract Charge