MARKET RISK arises from the level of volatility of market prices of financial instruments.Exposure to market risk is measured by the impact of movements in the level of financial variables, such as stock prices, interest rates, real estate prices, and exchange rates.

27.1 GENERAL FEATURES The market risk and its capital charge are treated in different articles of the FD,namely 104, 105, 106, 111, and also in Articles 13 and 132. The development of the market risk module is discussed in Appendices I and J. CEIOPS has discussed the general structure of the market risk module in CEIOPS (2009d09, 2009f20). Dampeners are discussed in CEIOPS (2009e02, 2009e07, 2010a07), and in Section 27.8. Assets that are allocated to policies where the policyholders bear the investment risk are excluded from the module only to the extent that the risk is passed on to policyholders. Where assets held include an investment in a subsidiary undertaking, which manages all or part of the insurance undertaking’s investments on its behalf, the undertaking shall take into account the underlying assets held by the subsidiary undertaking.