Hong Kong banks await guidance on IRRBB for risk-free rates

HKMA will steer how historical volatility data can be used for valuing new options contracts

hkma

The Hong Kong Monetary Authority is to release guidance on how historical data should be used to value new interest rate options, in cases where there is not enough trading volume on the market to calculate implied volatility.

The guidance, which an HKMA spokesperson says should be released “in the next few days”, is part of broader advice covering reporting issues related to new alternative reference rates (ARR) in the context of calculating interest rate risk in the banking book (IRRBB).

“As

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