A credit equivalent for Shari'a-compliant hedging techniques can be derived using the Current Exposure Method.²⁴ The credit equivalent exposure is based on the positive mark-to-market replacement cost of the contract. An add-on factor must be added to cover for potential future credit exposure. (See Appendix CA-2 for full details. Also see Paragraph CA-4.7.20 for conditions for applying 0% RW to such contracts.)

²⁴ Current exposure is the larger of zero or the market value of a transaction, or portfolio of transactions with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy. Current exposure is often also called replacement cost (see Appendix CA-2 for details).