CA-4.3.30

Under the Current Exposure Method, the calculation of the counterparty credit risk charge for an individual contract is as follows:

Counterparty charge = [(RC + add-on) – C_A] x r x 8%

Where:

RC = The replacement cost,
Add-on = The amount for potential future exposure calculated according to paragraph 45 of Appendix CA-2.
C_A = The volatility adjusted collateral amount under the comprehensive approach prescribed in Paragraphs CA-4.3.3 to CA-4.3.16, or zero if no eligible collateral is applied to the transaction, and
r = The risk weight of the counterparty.

CA-4.3.31

When effective bilateral netting contracts are in place, RC is the net replacement cost and the add-on is A_Net as calculated according to paragraph 50 (i) to 50 (vi) of Appendix CA-2. The haircut for currency risk (H_fx) must be applied when there is a mismatch between the collateral currency and the settlement currency. Even in the case where there are more than two currencies involved in the exposure, collateral and settlement currency, a single haircut assuming a 10-business day holding period scaled up as necessary depending on the frequency of mark-to-market must be applied.

CA-4.3.32

As an alternative to the Current Exposure Method for the calculation of the counterparty credit risk charge, conventional bank licensees may also use the Standardised Method.