Calculation of Capital Requirement
CA-4.3.3
For a collateralised transaction, the exposure amount after risk mitigation is calculated as follows:
E* = Max {0, [E x (1 + He) - C x (1 - Hc - Hfx)]}
where:
E* = The exposure value after risk mitigation
E = Current value of the exposure
He = Add-on 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 exposureJanuary 2015CA-4.3.4
The exposure amount after risk mitigation is multiplied by the risk weight of the counterparty to obtain the risk-weighted asset amount for the collateralised transaction.
January 2015CA-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.
January 2015CA-4.3.6
Where the collateral is a basket of assets, the haircut on the basket will be:
H = ∑i ai Hi, where ai is the weight of the asset (as measured by units of currency) in the i basket and Hi the haircut applicable to that asset.January 2015
