Calculate the total capital, Financial Accounting

The current balance sheet of CBKH shows $800 million of corporate loans ($500 million of which being rated AA- and the remaining rated BBB+), $200 million of bonds issued by an OECD country with a credit rating of BBB, $400 million of residential mortgage, and $350 million of personal loans. In addition, HCU has the following transactions with an AA-rated corporation:

(a) a 7-year interest rate swap with a principal of $100 million worth $3 million;

(b) a 9-month foreign exchange forward contract with a principal of $150 million worth -$9 million; and

(c) a 2-year long option on gold with a principal of $50 million worth $7 million (here the principal amount is roughly the exercise price amount). What is the total capital requirement under Basel I if there is no netting? What difference does it make if the netting amendment applies? What is the total capital required under Basel II when the standard approach is used?

Posted Date: 3/25/2013 5:21:40 AM | Location : United States







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