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