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Estimate the credit-equivalent amount and the minimum required capital required under Basel I for Bank X that has the following transactions with Bank Y, assuming
- Estimate the credit-equivalent amount and the minimum required capital required under Basel I for Bank X that has the following transactions with Bank Y, assuming no netting.
(a) A 6-year forward contract on a British Pounds, currently worth -$10 million, to buy Pounds now worth $300 million
(b) A nine-month total return swap on the S&P 500. The principal is now $250 million and the current market value is $15 million.
(c) A 10-year interest rate swap. The notional is $100 million and the current value of the swap is -$3 million.
(d) A 3-year swap related to gold, with notional $50 million and market value of $2 million.
- Repeat the calculation in 1 with the netting adjustment.
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