PRU A4.6.25

The PFE consists of (i) an aggregate add-on component, which consists of add-ons calculated for each asset class and (ii) a multiplier that allows for the recognition of excess collateral or negative mark-to-market value for the transactions.

PRU A4.6.26

PFE is calculated as follows:

PFE = multiplier * AddOn^aggregate

where:

AddOn^aggregate = the aggregate add-on component; and 

multiplier = a function of three inputs (V, C and AddOn^aggregate), calculated in accordance with Rule A4.6.27.

PRU A4.6.27

The multiplier input is calculated in accordance with the following formula:

where:

exp(…) = the exponential function;

Floor = 5%;

V = the value of the derivative transactions in the netting set; and

C = the haircut value of the net collateral held, calculated in accordance with Section A4.3.