PRU A4.3.7

Past version: effective from 21/10/2015 - 20/10/2015
To view other versions open the versions tab on the right

An Authorised Person using standard supervisory haircuts or own-estimate haircuts under the FCCA must calculate E* for any collateralised transaction covered by a qualifying bilateral Netting agreement or qualifying cross-product Netting agreement other than OTC Derivative transactions or long settlement transactions, using the following formula:

𝐸 = Max {0, [∑(𝐸) − ∑(𝐶) + add-on]}

where:

E* = Exposure value after risk mitigation;

E = fair value of the Exposure calculated in accordance with Section 4.9 of these Rules;

C = fair value of eligible financial Collateral received; and

add-on = the add-on amount to reflect the market price volatility and foreign exchange volatility, calculated in accordance with Rule A4.3.8 below.