Replacement Cost answers a simple question: if the counterparty defaults today, how much does the institution lose? It is the net mark-to-market value of all trades in the netting set after deducting
Collateral reduces exposure in SA-CCR, but its recognised value is adjusted before it enters the Replacement Cost calculation. Three checks apply in sequence: Material
Positive Correlation, FX mismatc
The liquidation period is the number of days used to scale regulatory haircuts on collateral. It represents how long it would take to close out the trades and liquidate the collateral in a netting set
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