CA-4.3.3

For a collateralised transaction, the exposure amount after risk mitigation is calculated as follows:

E* = Max {0, [E × (1 + He) - C × (1 - Hc - Hfx)]}

where:

E* = The exposure value after risk mitigation

E = Current value of the exposure

He = Haircut appropriate to the exposure

C = The current value of the collateral received

Hc = Haircut appropriate to the collateral

Hfx = Haircut appropriate for currency mismatch between the collateral and exposure

CA-4.3.4

The exposure amount after risk mitigation will be multiplied by the risk weight of the counterparty to obtain the risk-weighted asset amount for the collateralised transaction.

CA-4.3.5

The treatment for transactions where there is a mismatch between the maturity of the counterparty exposure and the collateral is given in paragraphs CA-4.6.1 to CA-4.6.4.

CA-4.3.6

Where the collateral is a basket of assets, the haircut on the basket will be

H = Σ_i a_i H_i , where a_i is the weight of the asset (as measured by units of currency) in the i basket and H_i the haircut applicable to that asset.