Question

Estimate the capital required under Basel I for a bank that has the following transactions with another bank. Assume no netting.
(a) A two-year forward contract on a foreign currency, currently worth $2 million, to buy foreign currency worth $50 million
(b) A long position in a six-month option on the S&P 500. The principal is $20 million and the current value is $4 million.
(c) A two-year swap involving oil. The principal is $30 million and the current value of the swap is –$5 million.
What difference does it make if the netting amendment applies?


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  • CreatedJuly 30, 2015
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