Commitment approach

The commitment approach, or commitment method, asks what the fund would hold if each derivative were replaced by its underlying. A long equity future counts as contracts × contract size × share price. The converted positions are summed in absolute value and divided by net asset value.

For alternative investment funds, Article 8 of Regulation (EU) 231/2013 sets the method, with conversion formulas in Annex II. Netting and hedging count only under strict conditions, such as a verifiable reduction in risk that holds in stressed markets. UCITS must also keep the global exposure of their derivatives within the portfolio’s net value.

Acclimetry’s leverage and borrowing limit offers a notional ratio over net asset value; it sums absolute notionals without netting. The derivative exposure limit offers named measures such as delta-adjusted notional. See AIFMD commitment method.