Table 1 to § 628.34 -Conversion Factor Matrix for Derivative Contracts1
Remaining maturity2 | Interest rate | Foreign exchange rate and gold | Credit (investment grade reference asset)3 | Credit (non- investment- grade reference asset) | Equity | Precious metals (except gold) | Other |
One (1) year or less | 0.00 | 0.01 | 0.05 | 0.10 | 0.06 | 0.07 | 0.10 |
Greater than one (1) year and less than or equal to five (5) years | 0.005 | 0.05 | 0.05 | 0.10 | 0.08 | 0.07 | 0.12 |
Greater than five (5) years | 0.015 | 0.075 | 0.05 | 0.10 | 0.10 | 0.08 | 0.15 |
1 For a derivative contract with multiple exchanges of principal, the conversion factor is multiplied by the number of remaining payments in the derivative contract.
2 For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that the fair value of the contract is 0, the remaining maturity equals the time until the next reset date. For an interest rate derivative contract with a remaining maturity of greater than 1 year that meets these criteria, the minimum conversion factor is 0.005.
3 A System institution must use the column labeled "Credit (investment-grade reference asset)" for a credit derivative whose reference asset is an outstanding unsecured long-term debt security without credit enhancement that is investment grade. A System institution must use the column labeled "Credit (non-investment-grade reference asset)" for all other credit derivatives.
Anet = (0.4*Agross) + (0.6*NGR*Agross)
Where:
Agross = the gross PFE (that is, the sum of the PFE amounts (as determined under paragraph (a)(1)(ii) of this section for each individual derivative contract subject to the qualifying master netting agreement); and
Net-to-gross Ratio (NGR) = the ratio of the net current credit exposure to the gross current credit exposure. In calculating the NGR, the gross current credit exposure equals the sum of the positive current credit exposures (as determined under paragraph (a)(1)(i) of this section) of all individual derivative contracts subject to the qualifying master netting agreement.
12 C.F.R. §628.34