Article 338 - Own funds requirement for the correlation trading portfolio
Table of content
Own funds requirement for the correlation trading portfolio
The correlation trading portfolio shall consist of securitisation positions and n-th-to-default credit derivatives that meet all of the following criteria:
all reference instruments are either of the following:
single-name instruments, including single-name credit derivatives, for which a liquid two-way market exists;
commonly-traded indices based on those reference entities.
A two-way market is deemed to exist where there are independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at such price within a relatively short time conforming to trade custom.
Positions which reference any of the following shall not be part of the correlation trading portfolio:
a claim on a special purpose entity, collateralised, directly or indirectly, by a position that would itself not be eligible for inclusion in the correlation trading portfolio in accordance with paragraph 1 and this paragraph.
the total specific risk own funds requirement that would apply just to the net long positions of the correlation trading portfolio;
the total specific risk own funds requirement that would apply just to the net short positions of the correlation trading portfolio.