Regulatory Alerts2024-02-15
Regulation No 256 on Calculating the Fund's Global Exposure and Risk Exposure to a Counterparty
Latvijas Banka issued Regulation No 256 to establish the procedures for investment management companies to calculate an investment fund's global exposure, counterparty risk, and transaction concentration risk. The regulation mandates that companies select either the commitment approach or the Value at Risk (VaR) approach based on a documented self-assessment of the fund's risk profile and investment strategy. It provides detailed methodologies for calculating exposure using these methods, including specific rules for netting, hedging, and valuing various financial derivative instruments.
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