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