• PRU A4.3.8 PRU A4.3.8

    An Authorised Person must calculate the add-on using one of the following approaches:

    (a) the approach according to the following formula:

    add-on = ∑(𝐸𝑆 . 𝐻𝑆 ) + ∑(𝐸𝐹𝑋. 𝐻𝐹𝑋)

    where:

    ES = absolute value of the net position in a given Security;

    HS = haircut appropriate to ES

    EFX = absolute value of the net position in a currency different from the settlement currency; and

    HFX = haircut appropriate for currency mismatch between the Collateral and Exposure;

    or
    (b) the approach using VaR models, provided the Authorised Person has received approval from the Regulator as referred to in Rule A4.3.5.

    • Guidance

      Approval for the use of the internal model approach is governed by Section 5.11 of Chapter 5.