A question for UCITS professionals

Hi all, I would like to ask something related to CESR’s Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS. On p. 11 there is an example: FX Forward/Currency Future A USD-denominated UCITS sells 20 contracts of the EUR/USD short term currency future (contract notional €250,000). As at 31/12/20XX the EUR/USD exchange rate is 1.30. This is effectively the same as an FX forward with a notional of €5,000,000. In both cases the commitment value is {20 * €250,000} * 1.30 = USD 6,500,000 The same UCITS also takes out a EUR/YEN FX forward contract for €1,000,000/YEN 100,000,000. As at 31/12/20XX the EUR/USD rate is 1.30 and the YEN/USD rate is 80. As both legs of the FX forward are in non-base currency, they must both be taken into account in the commitment calculation as follows: {€1,000,000 * 1.30} + {YEN 100,000,000 / 80} = USD 2,550,000 On p. 20, Box 9 it is said that: Any global exposure generated will be added with the global exposure created through the use of derivatives and the total of these must not be greater than 100% of NAV. My question is: What is the exposure related to forward contract because, in my opinion, commitment is different from exposure?

Be kind to also share the full document for reference

https://www.esma.europa.eu/sites/default/files/library/2015/11/10_788.pdf

This board being predominantly American and UCITS being a European phenomenon I doubt there will be anyone with hands on UCITS risk management experience. I gather from box 2 that global exposure is calculated using the commitment approach , whereby

2.1.1.2.c) Global exposure is then equal to the sum of: -The absolute value of the commitment of each individual derivative not involved in netting or hedging arrangements; and -The absolute value of each net commitment after the netting or hedging arrangements as described above; and -The sum of the absolute values of the commitment linked to EPM techniques (Ref Box6)

I gather from box 2 that global exposure is calculated using the commitment approach , whereby

2.1.1.2.c) Global exposure is then equal to the sum of: -The absolute value of the commitment of each individual derivative not involved in netting or hedging arrangements; and

Yes, it is true , but is that mean that in the case of “The same UCITS also takes out a EUR/YEN FX forward contract for €1,000,000/YEN 100,000,000. As at 31/12/20XX the EUR/USD rate is 1.30 and the YEN/USD rate is 80. As both legs of the FX forward are in non-base currency, they must both be taken into account in the commitment calculation as follows:” than the global exposure is USD 2,550,000?

I believe yes

Can somebody explain me the text in Box 2:

The commitment conversion methodology for standard derivatives is always the market value of the equivalent position in the underlying asset. This may be replaced by the notional value or the price of the futures contract where this is more conservative. So, market value or notional?