B. Equity Risk – Calculating the Capital Charge
C 52/2017 STA يسري تنفيذه من تاريخ 1/4/2021Bank XYZ has the following positions in its equity portfolio for a particular national market.
| Company | Position | No. of shares | Market price (AED) | Market value (AED) |
| A Corp. | Long | 10,000 | 35 | 350,000 |
| B Corp. | Short | 20,000 | 25 | 500,000 |
| C Corp. | Short | 5,000 | 50 | 250,000 |
| D Corp. | Long | 15,000 | 20 | 300,000 |
| E Corp. | Short | 2,000 | 60 | 120,000 |
To calculate the general market risk charge, we must first determine the overall net open position. The sum of the net long positions is AED 650,000 and the sum of the net short positions is AED 870,000. The overall net open position is short AED 220,000.
The capital charge for general market risk is 8% of AED 220,000, or AED 17,600.
Next, we must work out the specific risk charge.
The capital charge for specific risk is 8% of AED 1,520,000 or AED 121,600.
That lead to, overall capital charge for this portfolio is AED 17,600 + AED 121,000, or AED 139,200.