Document ID: chunk:federal_register_of_legislation:F2023L01599:reg:6:p27
Version: federal_register_of_legislation:F2023L01599
Segment Type: reg
Provision Reference: reg 6 (pt 27/35)
Character Range: 95795–99264

the maturity date for transaction i as defined in paragraph 21 of this Attachment, subject to a floor of 10 business days.
(b)          For a margined transaction, the maturity factor MFi must be set as:
       where:
       MPORi represents the margin period of risk as defined in paragraph 8(o) of this Prudential Standard.
49.         When calculating the PFE add-on for each asset class, the supervisory factor, the supervisory correlation parameter and the supervisory volatility are as given in Table 7.
Table 7: Summary table of supervisory parameters
Asset                      Supervisory factor (SF) (%)[41]  Supervisory Correlation (ρ) (%)  Supervisory volatility (σ) (%)
class

Interest rate              0.5                              N/A                              50
Foreign exchange           4.0                              N/A                              15
Credit single name         Credit rating grade 1            0.38                             50                              100
Credit rating grade 2      0.42
Credit rating grade 3      0.54
Credit rating grade 4      1.06
Credit rating grade 5      1.60
Credit rating grade 6      6.0
Credit index               Investment grade (IG)            0.38                             80                              80
Sub-investment grade (SG)  1.06
Equity single name         32                               50                               120
Equity index               20                               80                               75
Commodity                  Electricity                      40                               40                              150
Oil/gas                    18                               70
Metals
Agricultural
Other

Treatment of multiple margin agreements and multiple netting sets
50.         Where the transactions under a given margin agreement and netting set do not coincide, an ADI must follow an alternative treatment:
(a)          where multiple margin agreements apply to a single netting set, an ADI must follow the treatment set out in paragraph 51 of this Attachment; or
(b)          where there are multiple netting sets within a single margin agreement, an ADI must follow the treatment set out in paragraph 52 of this Attachment.
51.         Where multiple margin agreements apply to a single netting set, the netting set must be divided into sub-netting sets, each aligning with its respective margin agreement. The EAD of the original netting set must then be obtained by taking the sum of the EAD of each sub-netting set. The EAD for each sub-netting set is calculated according to paragraphs 42 to 49 of this Attachment using the relevant sub-netting set-level (i.e. margin agreement-level) parameters.[42]
52.         Where a single margin agreement applies to multiple netting sets, an ADI must calculate the EAD for the netting sets by:
(a)          calculating the replacement cost (RC) for all netting sets (RCMA) contained within a single margin agreement (MA) on the aggregate margin agreement level,[43] as common collateral cannot clearly be allocated to an individual netting set. The aggregate RC for all netting sets under a single margin agreement must be calculated as:
where:
VNS = the current net mark-to-market value of all derivative transactions within the netting set NS; and
CMA = the net haircut value of all currently available collateral (including both NICA and VM) under the margin agreement; and