Methodology note
Derivative exposure measures: notional, delta-adjusted, DV01, premium
A derivative limit must say what it measures, because the seven measures give very different numbers for the same contract. An option with 1,000 notional and a delta of 0.4 is 100% of a 1,000 book by notional but 40% delta-adjusted. Every measure is summed over the named derivative classes and divided by NAV.
derivative_exposure · Currency hedge ratiohedge_ratio · Leverage and borrowing limitleverage_limitThe seven measures
| Measure | What it reads |
|---|---|
| Market value | The absolute market value of each derivative |
| Notional | The absolute notional stated by the feed |
| Delta-adjusted notional | The absolute notional times delta, stated by the feed |
| Equivalent underlying | A governed field: exposure to the underlying, in portfolio currency |
| DV01 | A governed field: value change for a one-basis-point move |
| Option premium | A governed field, or the option's absolute market value |
| Provider risk | A governed field, as the risk provider delivered it |
Why the choice matters
Market value understates futures and swaps, which are often worth little against a large exposure. Notional overstates options far out of the money.
Delta adjustment brings an option closer to its economic exposure, and DV01 suits interest-rate limits. The SEC's Names Rule, for example, counts derivatives at notional, delta-adjusting options and using ten-year bond equivalents for interest-rate derivatives.
Pitfall: a missing measure
A derivative missing its chosen measure is a gap that blocks the compliant side. A DV01 limit over a swap with no DV01 field is not evaluated, not zero.
Gaps cannot hide a breach already proven. If the known notionals already exceed the cap, a missing one can only add, so the breach stands.
In the example
The option has a notional of 1,000 and a delta of 0.4 in a 1,000 book. Measured by delta-adjusted notional it is 40%, inside a 60% cap; by notional it would read 100% and breach.
Worked example
Delta-adjusted, the option's 400 is 40% of the book, inside a 60% cap; on plain notional the same option reads 100%.
Rule template:derivative_exposure classNames: Optionsmeasure: delta_adjusted_notional
Bounds: hard max 60%
| Holding | Class | Market value | Notional | Delta | Delta-adjusted notional |
|---|---|---|---|---|---|
| Equity index call | Options | 30 | 1,000 | 0.4 | 400 |
| Listed equities | Stocks | 970 | – | – | – |
| Group | Status | Value | Bounds | Headroom to the hard bound | Code |
|---|---|---|---|---|---|
| Derivative exposure | Compliant | 40% | ≤ 60% | 20% | WITHIN_LIMITS |
WITHIN_LIMITS: The measured value sits inside every approved bound.
Largest contributors: Derivative exposure → Equity index call 40%
Computed at build time by the Acclimetry rule engine (backend commit 8197063); the same code runs in the product.
Questions
Which measure should a policy use for options?
Delta-adjusted notional is closer to economic exposure than plain notional or premium. Whatever the choice, the feed must state that measure for every option.
Is DV01 a percentage?
No, it is an amount: the value change for a one-basis-point move. The limit expresses that amount as a share of NAV.
Sources
- 17 CFR 270.35d-1, investment company names (Cornell LII) · public domain · Read on12 October 2026