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Calculate the minimum Basel I capital requirement for Westpac Bank of the following three transactions with an AA-rated telecommunications conglomerate. A 24-month equity option with
Calculate the minimum Basel I capital requirement for Westpac Bank of the following three transactions with an AA-rated telecommunications conglomerate.
- A 24-month equity option with notional principal of $35 million that is worth -$1 million (i.e. Westpac is out-of-the money).
- A 3 year interest rate swap with notional principal of $120 million that is worth $1.25 million (i.e. Westpac Bank is in-the money).
- An over-the-counter 6 year Copper forward derivatives contract with notional principal of $300 million that is currently worth $2.5 million (i.e. Westpac Bank is in-the money).
What is the minimum capital requirement for these 3 transactions using a Basel II standardised approach?
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