Calculate the minimum Basel I capital requirement for Commonwealth Bank of the following three transactions with an A-rated retailing conglomerate.

A short position in a 11-month and 21 day wheat commodity option with notional principal of $65 million that is worth -$3 million (i.e. Commonwealth Bank is out-of-the money).

An 11 month interest rate swap with notional principal of $250 million that is worth $6 million (i.e. Commonwealth Bank is in-the money).

A six-month equity option contract with notional principal of $110 million that is currently worth $0.5 million (i.e. Commonwealth Bank is in-the money).

Answer rating: 100% (QA)

Short position in a wheat commodity option The notional principal of 65 million is not relevant for ... View the full answer