EIOPA · 155
155
- Regulation
- Guidelines on submission of information to NCAs (Preparatory phase)
- Article
- 35
- Submitted
- 2015-03-27
- Answered
- 2019-10-31
Question
Derivative Notional for Index Options
In cell A15 on S.08.01, should the strike of an index option be allowed for? Consider the following example. An insurer purchased 20 contracts of a FTSE100 Put with a strike price of 5,000 on ICE. The contract is valued at £10 per point. The index is now 7,000 at the quarter end. Is the notional amount:1) 20 x 10 = 200 (i.e. # contracts x contract value / point)2) 20 x 10 x 5,000 = 1,000,000 (i.e. # contracts x contract value / point x strike price)3) 20 x 10 x 7,000 = 1,400,000 (i.e. # contracts x contract value / point x index value at quarter end)4) Something else?
Answer
In cell A15 on S.08.01, for the example given the notional amount should be # contracts x contract value / point x index value at purchase (20 x 10 x 6,000 = 1,200,000)
This Q&A is published by European Insurance and Occupational Pensions Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.
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