1.Institutions shall calculate a single exposure value at netting set level in accordance with Section 3, subject to paragraph 2 of this Article.
2.The exposure value of a netting set shall be calculated in accordance with the following requirements:
(a)institutions shall not apply the treatment referred to in Article 274(6);
(b)by way of derogation from Article 275(1), for netting sets that are not referred to in Article 275(2), institutions shall calculate the replacement cost in accordance with the following formula:
RC = max{CMV, 0}
where:
RC | = | the replacement cost; and
CMV | = | the current market value.
(c)by way of derogation from Article 275(2) of this Regulation, for netting sets of transactions: that are traded on a recognised exchange; that are centrally cleared by a central counterparty authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; or for which collateral is exchanged bilaterally with the counterparty in accordance with Article 11 of Regulation (EU) No 648/2012, institutions shall calculate the replacement cost in accordance with the following formula:
RC = TH + MTA
where:
RC | = | the replacement cost;
TH | = | the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and
MTA | = | the minimum transfer amount applicable to the netting set under the margin agreement;
(d)by way of derogation from Article 275(3), for multiple netting sets that are subject to a margin agreement, institutions shall calculate the replacement cost as the sum of the replacement cost of each individual netting set, calculated in accordance with paragraph 1 as if they were not margined;
(e)all hedging sets shall be established in accordance with Article 277a(1);
(f)\mathrm{PFE} = \sum_{\mathrm{a}} \mathrm{AddOn}^{(a)}
institutions shall set to 1 the multiplier in the formula that is used to calculate the potential future exposure in Article 278(1), as follows:
where:
PFE | = | the potential future exposure; and
AddOn(a) | = | the add-on for risk category a;
(g)by way of derogation from Article 279a(1), for all transactions, institutions shall calculate the supervisory delta as follows:
δ = | | + 1 where the transaction is a long position in the primary risk driver
– 1 where the transaction is a short position in the primary risk driver
where:
δ | = | the supervisory delta;
(h)the formula referred to in point (a) of Article 279b(1) that is used to compute the supervisory duration factor shall read as follows:
supervisory duration factor = E – S
where:
E | = | the period between the end date of a transaction and the reporting date; and
S | = | the period between the start date of a transaction and the reporting date;
(i)the maturity factor referred to in Article 279c(1) shall be calculated as follows:
(i)for transactions included in netting sets referred to in Article 275(1), MF = 1;
(ii)for transactions included in netting sets referred to in Article 275(2) and (3), MF = 0,42;
(j)\mathrm{EffNot}_{j}^{\mathrm{IR}} = |\mathbf{D}_{j,1}| + |\mathbf{D}_{j,2}| + |\mathbf{D}_{j,3}|
the formula referred to in Article 280a(3) that is used to calculate the effective notional amount of hedging set j shall read as follows:
where:
\mathrm{EffNot}_{j}^{\mathrm{IR}} | = | the effective notional amount of hedging set j; and
Dj,k | = | the effective notional amount of bucket k of hedging set j;
(k)\mathrm{AddOn}_{\mathrm{j}}^{\mathrm{Credit}} = \sum_{\mathrm{k}} |\mathrm{AddOn}(\mathrm{Entity}_{\mathrm{k}})|
the formula referred to in Article 280c(3) that is used to calculate the credit risk category add-on for hedging set j shall read as follows:
where:
\mathrm{AddOn}_j^{\mathrm{Credit}} | = | the credit risk category add-on for hedging set j; and
AddOn(Entityk) | = | the add-on for the credit reference entity k;
(l)\mathrm{AddOn}_{\mathrm{j}}^{\mathrm{Equity}} = \sum_{\mathrm{k}} |\mathrm{AddOn}(\mathrm{Entity}_{\mathrm{k}})|
the formula referred to in Article 280d(3) that is used to calculate the equity risk category add-on for hedging set j shall read as follows:
where:
\mathrm{AddOn}_j^{\mathrm{Equity}} | = | the equity risk category add-on for hedging set j; and
AddOn(Entityk) | = | the add-on for the credit reference entity k;
(m)\mathrm{AddOn}_{\mathrm{j}}^{\mathrm{Com}} = \sum_{\mathrm{k}} \left| \mathrm{AddOn}\left(\mathrm{Type}_{\mathrm{k}}^{\mathrm{j}}\right) \right|
the formula referred to in Article 280e(4) that is used to calculate the commodity risk category add-on for hedging set j shall read as follows:
where:
\mathrm{AddOn}_{\mathrm{j}}^{\mathrm{Com}} | = | the commodity risk category add-on for hedging set j; and
\mathrm{AddOn}(\mathrm{Type}_k^j) | = | the add-on for the commodity reference type k.