ESMA · ESMA_QA_1918 Answer Published

Duration formula to use in the calculation of net short positions

Regulation
Short Selling Regulation (SSR) Regulation (EU) No 236/2012
Topic
Determination of net short position
Submitted
2012-10-10
Answered
2012-10-10
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Question

The DR (Commission Delegated Regulation regarding definitions, calculation of net short positions, covered sovereign CDS, notification thresholds, liquidity thresholds for suspending restrictions, significant falls in the value of financial instruments and adverse events (DR), adopted by EU Com on 5 July 2012 ) specifies in the Annex II part 2 para. 1 that positions should be calculated in “nominal value duration adjusted”. What duration definition should be used in the calculation?

Answer

[ESMA70-145-408 SSR Q&A, Q&A 7.1] The duration formula to use is the Modified Duration. Information about the Modified Duration for a specific debt issue by a sovereign issuer is easily available from data providers. Modified Duration can also be computed from other available “duration” or sensitivity indicators such as the Macaulay duration or PV01.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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