I would like to ask a question on behalf of Skandia regarding the reporting of Duration.
Generally, is it acceptable to use a simplification to calculate duration for fixed income securities if we do not have access to 3rd party data for some instruments in our fixed income portfolios? E.g. if we use the remaining maturity of a bond, the duration would generally be overstated. Would such a simplification be considered acceptable as long as the duration is not understated?
Information on the duration is important information from a risk management perspective, in particular in asset-liability management. The use of such simplification may be accepted but only considering the principle of materiality. This specific situation will need to be discussed with the national supervisory authority, in particular it needs to be explained why the use of the simplification is considered adequate from a risk management perspective.