Recital 4

(4) Instruments without optionality should only be subject to own funds requirements for delta risk for the non-exotic underlying(s) of the instruments, but not for curvature risk. The BCBS Minimum capital requirements for market risk, however, gives institutions the option to subject all instruments, including those without optionality, to own funds requirements for curvature risk. That option can be helpful for institutions that manage and hedge positions with and without optionality together. However, to avoid that that option is used primarily for the purpose of reducing own funds requirements, an institution wishing to exercise that option should be required to notify its intention to use that option to its competent authority, which should have the possibility to refuse the use of that option. The same should apply where an institution no longer wishes to use that option.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-18 · Text as adopted (Official Journal); later amendments are not incorporated in this text.