1. Scope of application and methods of measuring market risk
1. Market risk is defined as the risk of losses arising from movements in market prices. The risks subject to market risk capital charges include but are not limited to:
(a) Default risk, interest rate risk, credit spread risk, equity risk, foreign exchange risk and commodities risk for trading book instruments; and
(b) Foreign exchange risk and commodities risk for banking book instruments.
2. In determining its market risk for regulatory capital requirements, a bank may choose between two broad methodologies: the standardised approach and internal models approach for market risk, described in paragraphs 45 to 175 and 176 to 203, respectively, subject to the approval of the national authorities.
3. All transactions, including forward sales and purchases, shall be included in the calculation of capital requirements as of the date on which they were entered into. Although regular reporting will in principle take place only at
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