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