CA-4.6.3

As outlined in Paragraph CA-4.2.24, hedges with maturity mismatches are only recognised when their original maturities are greater than or equal to one year. As a result, the maturity of hedges for exposures with original maturities of less than one year must be matched to be recognised. In all cases, hedges with maturity mismatches will not be recognised when they have a residual maturity of three months or less.

CA-4.6.4

When there is a maturity mismatch with recognised credit risk mitigants (collateral, on-balance sheet netting, guarantees and credit derivatives) the following adjustment will be applied.

Pa = P x (t – 0.25) / (T – 0.25)
Where:

Pa = Value of the credit protection adjusted for maturity mismatch.
P = Credit protection (e.g. collateral amount, guarantee amount) adjusted for any haircuts.
T = Min (T, residual maturity of the credit protection arrangement) expressed in years.
T = Min (5, residual maturity of the exposure) expressed in years.