BANK 3.4.11 Calculation of derivatives exposure — single derivative contracts not covered by eligible bilateral netting agreement

For a single derivative contract that is not covered by an eligible bilateral netting agreement, a banking business firm must calculate its exposure as follows:

exposure = 1.4 × (RC + PFCE)


RC = max {(VCVMr + CVMp), 0} (in which V is the mark-to-market value of the contract; CVMr is any cash variation margin received that meets the conditions set out in rule 3.4.17 and does not reduce V under the relevant accounting standard; and CVMp is any cash variation margin provided by the firm that meets those conditions).

PFCE is the potential future credit exposure add-on amount over the remaining life of the contract, calculated as set out in rule 4.4.11.

Inserted by QFCRA RM/2019-6 (as from 1st January 2020).