Back Custom print Link Text Only Rich Text Print

  • General guidance on treatment of derivatives contracts

    • CA-3.4.11

      The following points should be noted for the treatment of certain derivatives contracts:

      (a) For contracts with multiple exchange of principal, the add-on factors are to be multiplied by the number of remaining payments in the contracts.
      (i) For contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset such that the market value of the contract is zero on these specified dates, the residual maturity would be set equal to the time until the next reset date.
      (ii) Forwards, swaps, purchased options and similar derivative contracts not covered in any of the above mentioned categories should be treated as 'other commodities'.
      (iii) No potential future credit exposure (as referred to under Paragraph CA-3.4.12) would be calculated for single currency floating/floating interest rate swaps.
      October 07