Institutions shall calculate the replacement cost for single netting sets that are subject to a margin agreement in accordance with the following formula:
RC = max{CMV – VM – NICA, TH + MTA – NICA, 0}
where:
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RC
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=
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the replacement cost;
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VM
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=
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the volatility-adjusted value of the net variation margin received or posted, as applicable, to the netting set on a regular basis to mitigate changes in the netting set's CMV;
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TH
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=
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the margin threshold applicable to the netting set under the margin agreement below which the institution cannot call for collateral; and
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MTA
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=
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the minimum transfer amount applicable to the netting set under the margin agreement.
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