• Minimum holding periods, remargining or revaluation conditions

    • PRU A4.3.24

      The following table sets out the minimum holding periods and remargining or revaluation conditions for different types of transactions where an Authorised Person uses own-estimate haircuts:

      Transaction type Minimum holding period Remargining/ Revaluation Condition
      Repos, reverse repos, Securities or commodities lending or Securities or commodities borrowing transactions Five business days daily remargining
      OTC Derivative transactions and margin lending transactions Ten business days daily remargining
      Exposures secured by eligible financial Collateral 20 business days daily revaluation

    • PRU A4.3.25

      Where the assumed minimum holding period is not met or remargining or revaluation conditions are not fulfilled, an Authorised Person must calculate the applicable haircut using the following formula:

      H = HM √{[NR + (TM - 1)]/ TM}


      where -

      "H" refers to the haircut;

      "HM" refers to the haircut under the minimum holding period;

      "TM" refers to the minimum holding period for the type of transaction or eligible financial Collateral; and

      "NR" refers to the actual number of business days between remargining or revaluation, as the case may be.

    • PRU A4.3.26

      When an Authorised Person uses a holding period, TN, which is different from the specified minimum holding period, TM, the Authorised Person must calculate HM using the following formula:

      HM = HN√(TM/TN)

      where -

      "TN" refers to the holding period used by the Authorised Person for deriving HN; and

      "HN" refers to the haircut based on the holding period TN.