Entire Section
PIB A4.3.6 PIB A4.3.6
An
Authorised Firm using standard supervisory haircuts or own-estimate haircuts under the FCCA must calculate E* for any collateralised transaction not covered by a qualifying bilateralNetting agreement or a qualifying cross-productNetting agreement other than OTCDerivative transactions or long settlement transactions, using the following formula:E* = max {0, [E (or EAD)(1 + HE) – C(1 – HC – HFX)]}
where;
E* =
Exposure value after risk mitigation;E = fair value of the
Exposure calculated in accordance with PIB section 4.9;HE = haircut appropriate to the
Exposure ;C = fair value of the eligible financial
Collateral received;HC = haircut appropriate to the
Collateral , or if theCollateral is a basket of assets, the weighted sum of the haircuts appropriate to the assets in the basket where each weight is the proportion of the asset in the basket in units of currency; andHFX = haircut appropriate for currency mismatch between the
Collateral andExposure .Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]PIB A4.3.6 Guidance
Where the residual maturity of the
Collateral is shorter than the residual maturity of theExposure , theAuthorised Firm must substitute PA calculated in accordance with Rules PIB 4.13.14 to PIB 4.13.16 for C(1 − HC − HFX).Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]