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)