Contents
3.By way of derogation from paragraph 2, where institutions cannot calculate the loss for some financial instruments or commodities included in the portfolio referred to in paragraph 1, corresponding to a scenario of future shock applied to one or several non-modellable risk factors by using their pricing methods, they shall apply the following steps in the following order:
(a)they shall identify those financial instruments or commodities and the cause of the failure of the pricing calculation;
(b)they shall use sensitivity-based pricing methods, including at least the material first order and material second order terms of Taylor series approximations, to reflect the change in the price of those financial instruments or commodities due to changes in the non-modellable risk factors in this scenario of future shock.
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