Calculation of Margin
The calculation of exposure should follow the below formula:
If Collateral Type = Cash then
Loan Value = ((LoanQuantity * SecurityPrice)*Margin%) * FXRate)
If Collateral Type = Non-Cash then
Exposure = Loan Value – ((CollateralQuantity*SecurityPrice)*Haircut%* FXRate)
(a) Margin% may be dependent on factors such as asset class, credit rating, liquidity, loan ccy vs cash collateral currency. Margin% must be bilateral agreed.
(b) Margin% is not usually applied to non-cash collateralised transactions. However, it may be used in cases where Tri-Party agent applies Haircut% to collateral and cannot know factors such as cross currency exposure between loan & collateral
(c) FXRate should be previous close-of-business see Asset Price
(d) Please note the formula for billing IBP-157
Already a member? Login to your account
Interested in Becoming a Member?
ISLA’s members span the breadth and depth of the securities lending industry, and there are many benefits of joining the Association’s network.Become a member today