Question
In Annex V.b it is stated that the Initial Market Value (IMV) means the 'unrealized balance'. Institutions seek more guidance in how to apply this. Should it be the mark-to-market on 27 October 2016, or the difference between the MtM's of 27 October 2016 and 13 October 2016?
Background on the question
Among institutions participating in the 2017 Market Risk benchmarking exercise there is confusion regarding the interpretation of the Initial Market Value (IMV).
Answer
Initial Market Valuation (IMV) is defined in Annex V of the Draft ITS on Supervisory Reporting for Institutions for benchmarking the internal approaches (ITS on benchmarking) for the 2017-benchmarking exercise as the unrealised balance (i.e. profit or loss that has been made but not yet realized or it would be realized if the position is closed out (or “unwound”)). Basically it means that IMV := MtM (13/10/2016) + {MtM (27/10/2016, 5:30 CET) – MtM (13/10/2016)}, where MtM stands for Mark to Market. It is computed as the market value of the portfolio at the booking date plus the profit and loss until the valuation date and time, i.e. it equals the market-to-market of the portfolio on 27 October 2016, 5:30 CET. DISCLAIMER: The present Q&A on Supervisory reporting is provisional. It will be reviewed after the Implementing Regulation is in force and published in the Official Journal. The text of the Implementing Regulation may differ from the text of the draft ITS to which this Q&A refers.