1. Institutions shall have in place clearly defined policies and procedures for the overall management of the trading book. Those policies and procedures shall at least address:
(a) the activities which the institution considers to be trading business and as constituting part of the trading book for own funds requirement purposes;
(b) the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;
(c) for positions that are marked-to-model, the extent to which the institution can:
(i) identify all material risks of the position;
(ii) hedge all material risks of the position with instruments for which an active, liquid two-way market exists;
(iii) derive reliable estimates for the key assumptions and parameters used in the model;
(d) the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner;
(e) the extent to which legal restrictions or other ope
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