CFM INDOSUEZ Wealth Management - 2020 Annual Report

138 Level 1 instruments Level 1 includes all derivatives traded on active organised markets (options, futures, etc.), regardless of the underlying asset (interest rate, currencies, preciousmetals, main equity indices) and equities and bonds listed on an active market. Amarket is considered to be activewhen prices are readily and regularly available from stock exchanges, brokers, traders, price assessment services or regulatory agencies and such prices represent actual transactions that regularly occur on themarket under normal conditions. Corporate and government and agency bonds whose valuation is based on prices obtained from independent sources that are considered executable and regularly updated are classified as Level 1. Most sovereign bond holdings are classified at this level. Level 2 instruments The main products recognised in Level 2 are: - linear derivatives such as interest rate swaps, currency swaps, and foreign exchange forward contracts. These products are valued using simple models shared by the market, based on parameters that are either directly observable (exchange rate, interest rates) or that can be derived from the market price of observable products (currency swaps); - non-linear vanilla products such as caps, floors, swaptions, currency options, stock options, credit default swaps, including digital options. These products are valued using simple models that are shared by themarket based on parameters that are either directly observable (exchange rate, interest rates, stock prices) or that can be derived from the market price of observable products (volatilities). Level 3 instruments Level 3 products are those that do not meet the criteria for classifi- cation at level 1 and 2, and are thus mainly products with a high mod- el risk or products whose valuation requires the use of significant unobservable parameters. NOTE 11: IMPACT OF CHANGES TO ACCOUNTING METHODS OR OTHER EVENTS N/A NOTE 12: HIGHLIGHTS AFTER 31 DECEMBER 2020 Post-balance sheet events not liable to impact the closed financial statements. At 31 December 2020 N/A