1. The Standardised Method (SM) can be used only for OTC derivatives and long settlement transactions. The exposure value shall be calculated separately for each netting set. It shall be determined net of collateral, as follows:
exposure value =
(1) In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent authorities, choose either original or residual maturity.
where:
CMV = current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral, that is, where:
where:
CMVi = the current market value of transaction i;
CMC = the current market value of the collateral assigned to the netting set, that is, where:
where
CMCl = the current market value of collateral l;
i = index designating transaction;
l = index designating collateral;
j = index designating hedging set category. These hedging sets correspond to risk factors for which risk positions of opposite sign can be offset to yield a net
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