(g)

for institutions using the Internal Model Method set out in Section 6 of Chapter 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year according to the following formula: M = min(Σ_(k)EffectiveEE_(t_(k)) · Δt_(k) · df_(t_(k)) · s_(t_(k)) + Σ_(k)EE_(t_(k)) · Δt_(k) · df_(t_(k)) · (1 – s_(t_(k))) / Σ_(k)EffectiveEE_(t_(k)) · Δt_(k) · df_(t_(k)) · s_(t_(k))),5 where: S_(t_(k))= a dummy variable whose value at future period t_(k) is equal to 0 if t_(k) > 1 year and to 1 if t_(k) ≤ 1; EE_(t_(k))= the expected exposure at the future period t_(k); EffectiveEE_(t_(k))= the effective expected exposure at the future period t_(k); df_(t_(k))= the risk-free discount factor for future time period t_(k); Δt_(k) = t_(k) – t_(k–1);

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Source: EUR-Lex (Cellar) · retrieved 2026-09-25 · Text as adopted (Official Journal); later amendments are not incorporated in this text.