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We are not sure, what to report in S.08.02. for profit and loss of the IRS SWAP. In the EIOPA logfiles we found the following instruction for the profit and loss: "Amount of profit and loss arising from the derivative since inception, realised at the closing/ maturing date."
For example:Situation 1Clearing IRS SWAP X. On daily base client received cash in/outflow:Q1 2017 open position 1000Q2 2017 close position 1000In Q2 2017 we have to report S0802 due to closing IRS SWAP X. For the profit and loss, we take the daily cashflow of the IRS SWAP from the inception date (Q1 2017) untill to closing date (Q2 2017). Is that correct?
Situation 2Clearing IRS SWAP X. On daily base client received cash in/outflow:Q1 2017 Open position 1000Q2 2017 Close position 1000Q3 2017 Open position 400Q3 2017 Close position 400
In Q3 we report S0802 due to closing position 400. For the profit and loss we take the daily cashflow of the IRS Swap from inception date - closing date.a) Should we calculated the profit and loss from Q1 2017 - Q3 2017 (due the same IRS SWAP X)?b) Should we only take the daily cashflow from Q3 to calculate the profit and loss.
In this case, the IRS Swap X was completely close in Q2, but open a new position and close the same position for the IRS SWAP X in Q3. We are not sure which is correct a or b. Please advise?

European Insurance and Occupational Pensions Authority · Accepted Answer

The interpretation in situation 1 is correct. For IRS the profit or loss corresponds to the net cash-flow in the period from inception to the closing/maturity date.
For what regards situation 2, b) is the correct answer.  The original position on IRS Swap X is closed in Q2 2017, therefore the profit/loss to date has to be reported in Q2 2017 in S0802. Then a new position on IRS Swap X is opened and closed in Q3 2017, therefore the profit/loss to date has to be reported in Q3 2017 in S0802.

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