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