Question

A bank has the following transaction with a AA-rated corporation
(a) A two-year interest rate swap with a principal of $100 million that is worth $3 million
(b) A nine-month foreign exchange forward contract with a principal of $150 million that is worth –$5 million
(c) An long position in a six-month option on gold with a principal of $50 million that is worth $7 million
What is the capital requirement under Basel I if there is no netting? What difference does it make if the netting amendment applies? What is the capital required under Basel II when the standardized approach is used?


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  • CreatedJuly 30, 2015
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