2019 Fall 22 b ii

NycxBattleNycxBattle
in OSFI.ORSA

For Interest Risk

Since its captured as part of the MCT via market risk. Do we still need to incorporate it as part of Internal Capital Target?

The solution from CAS said yes because it affected Government Bonds. But is the margin for government bond already included in the equity margin?

Comments

  • Staff-T1Staff-T1
    The CAS solution is correct. An internal capital target is meant to reflect how much economic capital a firm needs to run. There is risk from a loss of value due to rising interest rates reducing the PV of bond cash flows. And no a govt bond isn't considered equity
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