EBA · 2016_2931 Archive

Clarification on portfolio specification.

Regulation
Directive 2013/36/EU (CRD)
Article
78, para. 2
Topic
Supervisory reporting - Supervisory Benchmarking
Submitted by
Credit institution
Submitted
2016-10-06
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

The Common Instructions paragraph (n) mentions that the commodities OTC options are American. However, American style WTI options are listed options not OTC. Should we therefore book a European option with a maturity date of 13-Oct-2017 ?

Background

"(n) All OTC options shall be treated as follows: - as American for single name equities and commodities; - as European for equity indices, foreign exchange and swaptions." "Portfolio 1.18: Short oil put options Short 30 contracts of 6-month OTC WTI Crude Oil puts with strike = 12-month end-of-day forward price on 13 October 2016 (1 contract = 1000 barrels, total notional 30,000 barrels)."

Answer

In accordance with the instructions on portfolio 1.18 provided in Annex V to the Draft ITS on Supervisory Benchmarking for the 2017-exercise, the 6-month OTC WTI Crude Oil puts represent OTC options. As laid down in point (n) of the Common Instructions of Annex V, those OTC options are American options.   DISCLAIMER: The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.

Original source: European Banking Authority, Q&A ID 2016_2931

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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