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Counterparty Collateral & CRM Adjustment

Counterparty Risk

Calculate the Net Exposure After Credit Risk Mitigation, Excluded Collateral Amount, and Total Mitigation Effect instantly.

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Net Exposure After Credit Risk Mitigation

€9 000 000

Eligible Collateral Value

€5 000 000

Total Haircut Applied

25.0%

Haircut-Adjusted Collateral Value

€3 750 000

Residual Exposure After Collateral

€11 250 000

Credit Risk Mitigation Protected Amount

€2 250 000

Excluded Collateral Amount

€0

Total Mitigation Effect

€6 000 000

1Step 1

Eligible Collateral Value

Eligible Collateral Value=Collateral Market Value×Collateral Eligibility Flag (0/1)×Legal Enforceability Flag (0/1)\textit{Eligible Collateral Value} = \textit{Collateral Market Value} \times \textit{Collateral Eligibility Flag (0/1)} \times \textit{Legal Enforceability Flag (0/1)}
2Step 2

Total Haircut Applied

Total Haircut Applied=min⁡(Collateral Haircut+Timing / Mismatch Haircut,100)\textit{Total Haircut Applied} = \min(\textit{Collateral Haircut} + \textit{Timing / Mismatch Haircut}, 100)
3Step 3

Haircut-Adjusted Collateral Value

Haircut-Adjusted Collateral Value=Eligible Collateral Value×100−Total Haircut Applied100\textit{Haircut-Adjusted Collateral Value} = \textit{Eligible Collateral Value} \times \frac{100 - \textit{Total Haircut Applied}}{100}
4Step 4

Residual Exposure After Collateral

Residual Exposure After Collateral=max⁡(Gross Counterparty Exposure−Haircut-Adjusted Collateral Value,0)\textit{Residual Exposure After Collateral} = \max(\textit{Gross Counterparty Exposure} - \textit{Haircut-Adjusted Collateral Value}, 0)
5Step 5

Credit Risk Mitigation Protected Amount

Credit Risk Mitigation Protected Amount=Residual Exposure After Collateral×Credit Risk Mitigation Cover\textit{Credit Risk Mitigation Protected Amount} = \textit{Residual Exposure After Collateral} \times \textit{Credit Risk Mitigation Cover}
6Step 6

Net Exposure After Credit Risk Mitigation

Net Exposure After Credit Risk Mitigation=max⁡(Residual Exposure After Collateral−Credit Risk Mitigation Protected Amount,0)\textit{Net Exposure After Credit Risk Mitigation} = \max(\textit{Residual Exposure After Collateral} - \textit{Credit Risk Mitigation Protected Amount}, 0)
7Step 7

Excluded Collateral Amount

Excluded Collateral Amount=max⁡(Collateral Market Value−Eligible Collateral Value,0)\textit{Excluded Collateral Amount} = \max(\textit{Collateral Market Value} - \textit{Eligible Collateral Value}, 0)
8Step 8

Total Mitigation Effect

Total Mitigation Effect=Gross Counterparty Exposure−Net Exposure After Credit Risk Mitigation\textit{Total Mitigation Effect} = \textit{Gross Counterparty Exposure} - \textit{Net Exposure After Credit Risk Mitigation}

Understand the Counterparty Collateral & CRM Adjustment

Overview

This calculator is a support step inside the Solvency II Counterparty Risk chain. It reduces gross counterparty exposure for eligible collateral and simple credit-risk-mitigation cover before the exposure is passed into the Type 1 or Type 2 default-capital pages.[1][2]

Input Terms

  • Gross Counterparty Exposure: The exposure amount before collateral or CRM recognition.
  • Collateral Market Value: The current value of collateral available to reduce the exposure.
  • Collateral Eligibility / Legal Enforceability Flags: The yes-or-no controls that determine whether the collateral can be recognized in the first place.
  • Collateral Haircut / Mismatch Haircut: The reductions applied so collateral is not recognized at full face value when market, timing, or operational frictions exist.
  • CRM Cover: The share of the residual exposure covered by a qualifying guarantee or similar credit-risk-mitigation arrangement.

Technical Rationale

Collateral and CRM should reduce the exposure that is actually at risk of default, but only after eligibility and enforceability checks. This page separates that preprocessing step from the later capital-charge step so users can see the adjusted exposure clearly before it is routed into the main counterparty formulas.

The result is intentionally narrow. It does not try to replace the full legal analysis of complex netting sets, dispute clauses, or bespoke collateral agreements. It gives one clean adjusted-exposure number that can feed the live `Counterparty Type 1` and `Counterparty Type 2` engines.

Important Notes

  • This page is not the capital charge itself. It only prepares the exposure amount that the later counterparty pages consume.
  • If collateral is not eligible or not legally enforceable, the engine excludes it from recognition.
  • The final Net Exposure After CRM should be reviewed together with the downstream Type 1 or Type 2 page, depending on the exposure class.

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 189 (Counterparty default risk module: scope) - EIOPA
  2. Delegated Regulation (EU) 2015/35 - Art. 200 (Type 1 exposures) - EIOPA

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.