(1)
The notional amounts or underlying values, as applicable, of the |OTC derivative contracts in a netting set shall be multiplied by the percentages in the following Table 1:
(1) Table 1
Category Add-on factor Credit: 0-2 year residual maturity 2 % Credit: 2-5 year residual maturity 5 % Credit: 5+ year residual maturity 10 % Commodity 15 % Equity 15 % Foreign exchange 6 % Interest rate and inflation: 0-2 year residual maturity 1 % Interest rate and inflation: 2-5 year residual maturity 2 % Interest rate and inflation: 5+ year residual maturity 4 % Other 15 % (2)
The gross initial margin of a netting set shall be calculated as the sum of the products referred to in paragraph 1 for all OTC derivative contracts in the netting set.
(3)
The following treatment shall be applied to contracts which fall within more than one category:
(a)
where a relevant risk factor for an OTC derivative contract can be clearly identified, contracts shall be assigned to the category corresponding to that risk factor;
(b)
where the condition referred to in point (a) is not met, contracts shall be assigned to the category with the highest add-on factor among the relevant categories;
(c)
the initial margin requirements for a netting set shall be calculated in accordance with the following formula:
Net initial margin = 0,4 * Gross initial margin + 0,6 * NGR * Gross initial margin.
where:
(i)
net initial margin refers to the reduced figure for initial margin requirements for all OTC derivative contracts with a given counterparty included in a netting set;
(ii)
NGR refers to the net-to-gross ratio calculated as the quotient of the net replacement cost of a netting set with a given counterparty in the numerator, and the gross replacement cost of that netting set in the denominator;
(d)
for the purposes of point (c), the net replacement cost of a netting set shall be the bigger between zero and the sum of current market values of all OTC derivative contracts in the netting set;
(e)
for the purposes of point (c), the gross replacement cost of a netting set shall be the sum of the current market values of all OTC derivative contracts calculated in accordance with Article 11(2) of Regulation (EU) No 648/2012 and Articles 16 and 17 of Delegated Regulation (EU) No 149/2013 with positive values in the netting set;
(f)
the notional amount referred to in paragraph 1 may be calculated by netting the notional amounts of contracts that are of opposite direction and are otherwise identical in all contractual features except their notional amounts.
You are viewing ANNEX IV Standardised Method for the calculation of initial margin for the purposes of Articles 9 and 11 as of ANNEX IV Standardised Method for the calculation of initial margin for the purposes of Articles 9 and 11 was last updated on 01/01/2021.