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Assume a company has a long and short position that are affected by the same market risk exposure. Must the company choose opposite hypothetical changes to the long and short positions?

April 26, 2017affected assume COMPANY exposure market opposite position risk short

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Assume a company has a long and short position that are affected by the same market risk exposure. Must the company choose opposite hypothetical changes to the long and short positions?

1 Answer

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Answer The rules do not require a “worst case scenario” approach of applying a 10% decrease in the rate or price to the long position and a 10% increase to the short position. That answer does not appear useful given the low probability of opposite shifts in the same market risk exposure.