Calculate the EAD and risk weighted assets amount for a commodity swap
Steps to be followed:
1. Calculate the Exposure at Default(EAD) using current exposure method(CEM)
a. For the calculation of potential future exposure, the final rule contains the table for the conversion factor for commodities (precious metals) derivatives.
2. Derive the RW% percentage based on the details of the counterparty 3. Use the totals from step 1 and 2 to calculate the total of the risk weighted assets
Details of the commodity swap
* Notional: $50MM
* Fair Value: $300K
* Remaining maturity: Greater than one year and less than or equal to five years
* Counterparty: Domestic Bank
Use the same information to calculate the above however for the following counterparties also:
- QCCP
- Foreign Bank in OECD country