4B.1 Firms with permission under CRR Article 285 are required to capture the effects of margining within the calculation of Effective Expected Positive Exposure, which is derived from the profile of estimated Expected Exposure (EE). The PRA considers that firms are not required to estimate the initial EE recognising only collateral which has settled at the time of calculation. One example where it could, depending on circumstances, be appropriate to calculate initial EE on the basis of collateral which has not yet settled, is where the delay in settlement of collateral arises asa result of the ordinary collateral call and settlement cycle. A firm which calculates the initial EE on the basis of collateral which has not yet settled would be expected to monitor the impact of this modelling choice on an ongoing basis and hold capital against any understatement of economic risk. Firms would not be expected to recognise collateral in the initial EE which has been called for but disputed or otherwise delayed.