Article 105 › 11

Institutions shall establish and maintain procedures for calculating an adjustment to the current valuation of any less liquid positions, which can in particular arise from market events or institution-related situations such as concentrated positions and/or positions for which the originally intended holding period has been exceeded. Institutions shall, where necessary, make such adjustments in addition to any changes to the value of the position required for financial reporting purposes and shall design such adjustments to reflect the illiquidity of the position. Under those procedures, institutions shall consider several factors when determining whether a valuation adjustment is necessary for less liquid positions. Those factors include the following: (a) the amount of time it would take to hedge out the position or the risks within the position; (b) the volatility and average of bid/offer spreads; (c) the availability of market quotes (number and identity of market makers) and the volatility and average of trading volumes including trading volumes during periods of market stress; (d) market concentrations; (e) the ageing of positions; (f) the extent to which valuation relies on marking-to-model; (g) the impact of other model risks.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04