IPRU-INV 5.15 OTC derivatives: calculation of credit equivalent amount

IPRU-INV 5.15.1R


By attaching current market values to contracts (marking to market), obtain the current replacement cost of all contracts with positive values.


To obtain a figure for potential future credit exposure, the notional principal amounts or values underlying the firm's aggregate positions are multiplied by the following percentages:

Residual Maturity

Interest-Rate Contracts

Foreign-Exchange Contracts

One year or less




The credit equivalent amount is the sum of current replacement cost and potential future credit exposure.


Except in the case of single-currency "floating/floating interest rate" swaps in which only the current replacement cost will be calculated, bought OTC equity options and covered warrants shall be subject to the treatment accorded to exchange rate contracts.