Institutions must calculate own funds requirements for market risk on all trading book positions and on non-trading positions subject to foreign exchange or commodity risk using the alternative standardised approach (sensitivities-based method, default risk charge and residual risk add-on), the alternative internal model approach for trading desks for which they have permission (expected shortfall, back-testing and profit and loss attribution tests, modellability of risk factors, stress scenarios and an internal default risk model), or the simplified standardised approach where they meet its conditions, and document any foreign exchange derogation for positions deducted from own funds.
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