• Currency mismatches

    • PRU 4.13.13

      (1) In the case where there is a currency mismatch between the credit protection and the underlying Exposure, an Authorised Person must reduce the amount of the Exposure deemed to be protected by applying a haircut, as follows:
      Protected portion GA = G (1- HFX)
      where:
      (a) G = notional amount of the credit protection; and
      (b) HFX = haircut appropriate for currency mismatch between the credit protection and underlying obligation Exposure based on a ten-business day holding period, assuming daily mark-to-market.
      (2) An Authorised Person must determine HFX in the following manner:
      (a) if the Authorised Person uses standard supervisory haircuts, HFX is 8%; and
      (b) if the Authorised Person uses own-estimate haircuts, it must estimate HFX according to Rules A4.3.6 to A4.3.26 in App4 based on a ten-business day holding period, assuming daily mark-to-market.
      (3) If the credit protection is not marked-to-market daily, HFX must be scaled in accordance with Rule A4.3.25.