in force 2021-06-28 MODIFIED+1,535 −784§
Amended by Regulation (EU) 2019/2033 32019R2033 · Regulation (EU) 2019/876 32019R0876 · Regulation (EU) 2021/558 32021R0558 · Regulation (EU) 2020/873 32020R0873
applies from: unchanged
Sources disagree — the text comparison found this change; the EU's own amendment metadata does not list it. Both are shown; neither is overruled.
The heading changes from Transactions with a non-linear risk profile to Potential future exposure, and the substance of the article shifts from defining risk position sizes for non-linear OTC derivatives based on delta equivalent effective notional value to defining a formula for calculating the potential future exposure of a netting set using add-on values per risk category and a multiplier.
The prior text's paragraphs on non-linear risk positions tied to Article 280(1) and to modified duration for debt instruments or payment legs are replaced with new paragraphs specifying the potential future exposure formula, a rule for aggregating potential future exposure across multiple netting sets under one margin agreement referencing Article 275(3), and a multiplier calculation referencing Article 275(1), (2) and (3).
Cited: Art. 278, v1 · Art. 278, v2
text before / after
texts differ too much for an inline diff; shown separately
before (02013R0575-20201228)
Article 278 Transactions with a non-linear risk profile 1. Institutions shall determine the size of the risk positions for transactions with a non-linear risk profile in accordance with the following paragraphs. 2. The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, of which the underlying is not a debt instrument or a payment leg shall be equal to the delta equivalent effective notional value of the financial instrument that underlies the transaction in accordance with Article 280(1). 3. The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, of which the underlying is a debt instrument or a payment leg, shall be equal to the delta equivalent effective notional value of the financial instrument or payment leg multiplied by the modified duration of the debt instrument or payment leg, as the case may be.
after (02013R0575-20210629)
Article 278 Potential future exposure 1. Institutions shall calculate the potential future exposure of a netting set as follows:PFEmultiplieraAddOna where: PFE the potential future exposure; a the index that denotes the risk categories included in the calculation of the potential future exposure of the netting set; AddOn(a) the add-on for risk category a calculated in accordance with Articles 280a to 280f, as applicable; and multiplier the multiplication factor calculated in accordance with the formula referred to in paragraph 3. For the purpose of this calculation, institutions shall include the add-on of a given risk category in the calculation of the potential future exposure of a netting set where at least one transaction of the netting set has been mapped to that risk category. 2. The potential future exposure of multiple netting sets that are subject to one margin agreement, as referred in Article 275(3), shall be calculated as the sum of the potential future exposures of all the individual netting sets as if they were not subject to any form of a margin agreement. 3. For the purposes of paragraph 1, the multiplier shall be calculated as follows: multiplier = 1 if z ≥ 0 min1, Floorm1Floormexp zy if z0 where: Floorm = 5 %; y = 2 · (1 – Floorm) · ΣaAddOn(a) z = CMV – NICA for the netting sets referred to in Article 275(1) CMV – VM – NICA for the netting sets referred to in Article 275(2) CMVi – NICAi for the netting sets referred to in Article 275(3) NICAi the net independent collateral amount calculated only for transactions that are included in netting set i. NICAi shall be calculated at trade level or at netting set level depending on the margin agreement.