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Application provision

1.1 Unless otherwise stated, this Part applies to:

4.1

01/01/2016

Wherever possible, a firm must use mark to market in order to measure the value of investments and positions.

4.2

01/01/2016

Subject to 4.3, when marking to market, a firm must use the more prudent side of bid/offer unless the firm is a significant market maker in a particular position type and it can close out at the mid-market price, in which case the firm can use the mid-market price.

4.3

01/01/2016

When calculating the current exposure value of a credit risk exposure to a counterparty:

  1. (1) a firm must select as a basis of valuation either:
    1. (a) the more prudent side of bid/offer; or
    2. (b) the mid-market price;
  2. (2) the firm must be consistent in the basis of valuation it applies under (1) both between counterparties and year-on-year; and
  3. (3) where the difference between the more prudent side of bid/offer and the mid-market price is material, the firm must consider making adjustments or establishing reserves.