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  • Calculation of Capital Requirement Employing the Standard Supervisory Haircuts

    • CA-4.7.36

      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 = 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

      Apr 08

    • CA-4.7.37

      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. The treatment for transactions where there is a mismatch between the maturity of the counterparty exposure and the collateral is given in paragraphs CA-4.7.47 to CA-4.7.50.

      Apr 08

    • CA-4.7.38

      Where the collateral is a basket of assets, the haircut on the basket will be H = Σi 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.

      Apr 08