Instruments within a market risk category may be grouped in the tabular disclosures based on common characteristics. What are examples of common characteristics?
Answer Some examples of categories include: 1) fixed or variable rate instruments; 2) long or short forwards and futures; 3) forwards or options on commodities grouped by commodity; 4) written or purchased put or call options, with similar strike prices; 5) the currency in which the instrument’s cash flows are denominated; 6) hedges of net investments in foreign entities or intercompany foreign currency transactions of a long-term investment nature, and 7) derivatives designated to anticipated transactions. Within the foreign currency exchange rate risk disclosure, instruments must be grouped by functional currency. Different functional currencies may be aggregated when currencies are economically related, managed together for internal risk management purposes, and have statistical correlations of greater than 75% over each of the past three years.
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