CRR Art. 325p: every consolidated version and what changed

Version in force 27 June 2019, Inserted +2,080 −0§

Amended by Regulation (EU) 2019/876 32019R0876 on EUR-Lex (external, EUR-Lex)

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Explanation, written by a model and checked against the cited text

This article is newly added and sets out how commodity risk factors are defined for delta, vega and curvature purposes under the own funds framework.

It specifies the sector buckets, the commodity spot price maturities and conditions for treating two commodity prices as the same risk factor, the implied volatility maturities for vega risk, and the vector-based treatment of curvature risk by commodity type.

Cited: Art. 325p, v2 (external, EUR-Lex)

v1 is the previous version, v2 this one.

Text from EUR-Lex

Inserted in this version 02013R0575-20190627

Article 325p
Commodity risk factors
1. The buckets for all commodity risk factors shall be the sector buckets referred to in Section 6.
2. The commodity delta risk factors to be applied by institutions to commodity sensitive instruments shall be all the commodity spot prices per commodity type and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall only consider two commodity prices of the same type of commodity, and with the same maturity to constitute the same risk factor where the set of legal terms regarding the delivery location are identical.
3. The commodity vega risk factors to be applied by institutions to options with underlyings that are sensitive to commodity shall be the implied volatilities of commodity prices per commodity type, which shall be mapped to the following maturities in accordance with the maturities of the corresponding options subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years. Institutions shall consider sensitivities to the same commodity type and allocated to the same maturity to be a single risk factor which institutions shall then offset.
4. The commodity curvature risk factors to be applied by institutions to options with underlyings that are sensitive to commodity shall be one set of commodity prices with different maturities per commodity type, expressed as a vector. For each instrument, the vector shall contain as many components as there are prices of that commodity that are used as variables by the institution's pricing model for that instrument. Institutions shall not differentiate between commodity prices by delivery location.
The sensitivity of the instrument to each risk factor used in the curvature risk formula shall be calculated as specified in Article 325g. For the purposes of curvature risk, institutions shall consider vectors having a different number of components to constitute the same risk factor, provided that those vectors correspond to the same commodity type.