Why this is mistaken
Price sensitivity alone does not complete the Topic 815 screen. Identify the underlying and notional or payment provision, compare the initial net investment with the required investment for a similar response, and test net settlement. Then consider scope exceptions and embedded terms. The corrected workpaper records evidence for every element and leaves the conclusion open when a settlement or exception fact is missing.
Where to watch
When this mistake may appear
- Its value changes with a price, so it is a derivative.
Check your work
Your work may contain this mistake if:
- Stops after identifying an underlying and does not test notional, initial investment, settlement, or scope exceptions.