Question
Under Article 28(a) for derivative contracts, RC is determined as the CMV, and according to Article 4 (36) current market value’ or ‘CMV’ means the net market value of the portfolio of transactions or securities legs subject to netting in accordance with Article 31, where both positive and negative market values are used in computing CMV By CMV (and than also RC) do you mean "net position" * "current exchange rate"?
Background on the question
I am trying to calculate replacement cost of forward foreign-exchange contracts as written above, but it comes out extremely high value compared to CRR. Example: Net position Currency Transaction value in base currency Market value Currency2 current exchange rate EUR/HUF Current Market value in base currency Maturity Replacement cost according to CRR buy 1,000,000 EUR 420,000,000 404,550,000 HUF 430 430,000,000 2022.10.13 -10,000,000 My interpretation is that CMV is „Current Market value in base currency” and according to IFR CMV=RC, so replacement cost is 430,000,000 HUF, while under CRR it would be -10,000,000 HUF. I would like to ask for clarification on whether I am misunderstanding it.
Answer
This question has been rejected because the issue it deals with is already explained or addressed in Art. 4(36) and Art. 28(a) and of Regulation (EU) 2019/2033 (Investment Firms Regulation, or IFR). For further information on the purpose of this tool and on how to submit questions, please see 'Additional background and guidance for asking questions'.