What types of assumptions would have to be disclosed regarding the sensitivity analysis?
Answer Companies must provide a description of the model, assumptions, and parameters underlying its analysis that are necessary to understand the market risk disclosures. For example, companies should disclose: 1) how “loss” is defined by the model (i.e. fair values, cash flows, or earnings), 2) a general description of the modeling technique, 3) the types of instruments covered by the model, and 4) other information about the model’s assumptions and parameters. For example, the magnitude and timing of selected hypothetical changes in market rates or prices used and the effects of expected correlation between various foreign currencies.
