Question: Estimate the credit-equivalent amount and the minimum required capital required under Basel I for Bank X that has the following transactions with Bank Y, assuming

  1. Estimate the credit-equivalent amount and the minimum required capital required under Basel I for Bank X that has the following transactions with Bank Y, assuming no netting.

(a) A 6-year forward contract on a British Pounds, currently worth -$10 million, to buy Pounds now worth $300 million

(b) A nine-month total return swap on the S&P 500. The principal is now $250 million and the current market value is $15 million.

(c) A 10-year interest rate swap. The notional is $100 million and the current value of the swap is -$3 million.

(d) A 3-year swap related to gold, with notional $50 million and market value of $2 million.

  1. Repeat the calculation in 1 with the netting adjustment.

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