IBANK 6.5.3 What to Include in Equity Position Risk

(1) In calculating the capital charge for equity position risk, an Islamic banking business firm must include equity Shari'a-compliant hedging instruments and off-balance-sheet positions that are affected by changes in equity prices.
(2) To calculate the charges for equity position risk for equity Shari'a-compliant hedging instruments and other off-balance-sheet positions, the firm must convert positions into notional equity positions, so that:
(a) equity Shari'a-compliant hedging instruments and off-balance-sheet positions relating to individual equities are reported at current market prices;
(b) equity Shari'a-compliant hedging instruments and off-balance-sheet positions relating to stock indices are reported as the mark-to-market value of the notional underlying equity portfolio; and
(c) equity swaps are treated as 2 notional positions.
Derived from QFCRA RM/2015-2 (as from 1st January 2016).