Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated, institutions shall reduce the value of the credit protection by the application of a volatility adjustment as follows:
where:
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G*
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=
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the amount of credit protection adjusted for foreign exchange risk,
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G
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=
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the nominal amount of the credit protection;
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Hfx
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=
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the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation determined in accordance with paragraph 4.
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