Article 1
Determination of the Own funds requirements for the non-delta risk of options and warrants
Institutions shall calculate their own funds requirements for market risk in relation to the non-delta risk of options or warrants as required by Article 329(3), Article 352(6) and Article 358(4) of Regulation (EU) No 575/2013, according to one of the following approaches:
the simplified approach as set out in Articles 2 and 3 of this Regulation;
the delta plus approach as set out in Articles 4, 5 and 6 of this Regulation;
the scenario approach as set out in Articles 7, 8 and 9 of this Regulation.
For the purposes of the calculation referred to in paragraph 1, institutions shall take the following steps:
break down baskets of options or warrants into their fundamental components;
break down caps and floors or other options which relate to interest rates at various dates, into a chain of independent options referring to different time periods (‘caplet’ and ‘floorlets’);
treat options or warrants on fixed-to-floating interest rates swaps into options or warrants on the fixed interest leg of the swap;
treat options or warrants that relate to more than one underlying among those described in Article 5(3), as a basket of options or warrants where each option has a single distinct underlying.