IBANK 6.3.6 Using Delta-Plus Method
(1) An Islamic banking business firm that writes options must calculate specific risk capital charges separately by multiplying the delta-equivalent value of each option by the risk-weight applicable under Part 6.5 (equity position risk) and Part 6.6 (profit rate risk in the trading book).
(2) In calculating general risk capital charge, the firm must enter delta-weighted positions with a debt security or profit rate as the underlying into the profit rate time bands in table 6.6.8A by using a two-legged approach. Under this approach, there is 1 entry at the time the underlying contract takes effect and a second entry at the time the underlying contract matures.
(3) For an option with a debt security as the underlying, the firm must apply a specific risk capital charge to the delta-weighted position based on the issuer's rating and in accordance with Part 6.6.
|Derived from QFCRA RM/2015-2 (as from 1st January 2016).|