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European Insurance and Occupational Pensions Authority

155

Q&A

Question ID: 155

Regulation Reference: Guidelines on submission of information to NCAs (Preparatory phase)

Article: 35

Template: S.08.01

Status: Final

Date of submission: 27 Mar 2015

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?

EIOPA 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)