International Finance and Accounting Handbook

8 • 24

Under the proposed two-part calculation, there would be separate requirements for the position in each individual equity (i.e.,

the gross position) and

for the net position in the market as a whole. Here we show how the system would work for a range of hypothetical portfolios, a

ssuming a capital

charge of 4 percent for the gross positions and 8 percent for the net positions.

x

Factor

y

Factor

Net Position

Capital

Sum of Long

Sum of Short

Gross Position

4 Percent

(difference between

8 Percent

Required

Stock

Positions

Positions

(sum of cols. 1 and 2)

of Gross

cols. 1 and 2)

of Net

(gross + net)

1

100

0

100

4

100

8

12

2

100

25

125

5

75

6

11

3

100

50

150

6

50

4

10

4

100

75

175

7

25

2

9

5

100

100

200

8

0

0

8

6

75

100

175

7

25

2

9

7

50

100

150

6

50

4

10

8

25

100

125

5

75

6

11

9

0

100

100

4

100

8

12

Source:

BIS, 1993.

http://www.bis.org.

Exhibit 8.10.

BIS

Capital Requirement for Equities (Illustration of

x

plus

y

Methodology).