Policy clause
"Derivative exposure no more than 10% of NAV": how to write it, test it and evidence it
A derivative exposure cap limits how much exposure contracts add relative to the fund's value. Market value understates it, because a future is worth little while exposing its full notional. Acclimetry's derivative exposure template supports market value, notional, delta-adjusted notional and four field-borne measures, summed in absolute terms over named classes.
Derivative exposure may not exceed 10% of net asset value.
derivative_exposureQuestions to settle before it can be tested
- Measured how: market value, notional or delta-adjusted notional? The same contracts can read 0.5% or 10.5% of NAV.
- Netting: does a protective put offset a long future? The template adds absolute measures and nets nothing.
- Which instruments: futures and options only, or forwards, swaps and warrants too? The rule measures the classes it names.
- Missing inputs: a derivative without its measure is a gap, but a partial sum already over the cap still proves the breach.
As a testable rule
Derivative exposure template, classes Futures and Options, measure delta-adjusted notional: the absolute notional times delta of each contract, summed over NAV. Hard maximum 10%, warning maximum 8%. A contract stating no notional or delta is a data gap; a partial sum over 10% is still a proven breach.
A testable wording
The sum of the absolute delta-adjusted exposures of all futures and options may not exceed 10% of net asset value. Offsetting positions are not netted.
The measures are compared in derivative exposure measures; delta-adjusted exposure defines the one used here.
Worked example
A long future and a protective put add, not net: their delta-adjusted exposure is 10.5% of NAV, against 0.5% at market value.
Rule template:derivative_exposure classNames: Futures, Optionsmeasure: delta_adjusted_notional
Bounds: warn max 8% · hard max 10%
| Holding | Class | Market value | Notional | Delta | Delta-adjusted notional |
|---|---|---|---|---|---|
| FTSE 100 index future, December 2026 | Futures | 3,000 | 310,000 | 1 | 310,000 |
| FTSE 100 put option, March 2027 | Options | 22,000 | 430,000 | -0.5 | -215,000 |
| UK equities | Equities | 2,900,000 | – | – | – |
| Bonds | Bonds | 1,800,000 | – | – | – |
| Cash | Cash | 275,000 | – | – | – |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Derivative exposure | Breach | 10.5% | ≤ 10% warning ≤ 8% | -0.5% -2.5% to warning | ABOVE_HARD_MAXIMUM |
ABOVE_HARD_MAXIMUM: The measured value exceeds the approved hard maximum, beyond any stated tolerance.
Largest contributors: Derivative exposure → FTSE 100 index future, December 2026 6.2%, FTSE 100 put option, March 2027 4.3%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
What each monitoring run records
Each run stores the exposure, its state, headroom, the measure used and the contracts as contributors. The result counts the derivatives measured and any measure gaps. A breach opens a case that records whether a trade or a market move caused it.