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PIB A4.3.7

An Authorised Firm 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, [ Σ (E ) − Σ (C) + add-on]}

where:

E* = Exposure value after risk mitigation;

E = fair value of the Exposure calculated in accordance with PIB section 4.9;

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 PIB Rule A4.3.8 below.

Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]