CA-9.2.14
Past version: Effective from 01 Apr 2011 to 31 Dec 2011
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Partial allowance will be recognised when the value of the two legs (i.e. long and short) usually moves in the opposite direction. This would be the case in the following situations:
(a) The position is captured in paragraph CA-9.2.12 under (b), but there is an asset mismatch between the reference obligation and the underlying exposure. Nonetheless, the position meets the requirements in paragraph CA-4.5.3 (g);
(b) The position is captured in paragraph CA-9.2.12 under (a) or CA-9.2.13 but there is a currency or maturity mismatch67 between the credit protection and the underlying asset; or
(c) The position is captured in paragraph CA-9.2.13 but there is an asset mismatch between the cash position and the credit derivative. However, the underlying asset is included in the (deliverable) obligations in the credit derivative documentation.
67 Currency mismatches should feed into the normal reporting of foreign exchange risk.
Amended: April 2011
Apr 08
Apr 08