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Answer: CNY 0
## Explanation To determine the additional collateral required, we need to calculate the collateral requirement based on the CSA terms: **Step 1: Calculate the initial collateral requirement** - Net exposure: CNY 25,000,000 - Threshold: CNY 14,000,000 - Collateral already posted: CNY 10,800,000 Initial collateral requirement = Net exposure - Threshold = 25,000,000 - 14,000,000 = CNY 11,000,000 **Step 2: Calculate the new collateral requirement** - New net exposure: CNY 27,000,000 - Threshold: CNY 14,000,000 New collateral requirement = New net exposure - Threshold = 27,000,000 - 14,000,000 = CNY 13,000,000 **Step 3: Calculate additional collateral needed** Additional collateral = New collateral requirement - Current collateral posted = 13,000,000 - 10,800,000 = CNY 2,200,000 **Step 4: Apply Minimum Transfer Amount (MTA)** - Minimum Transfer Amount = CNY 2,500,000 - Additional collateral needed (CNY 2,200,000) < Minimum Transfer Amount (CNY 2,500,000) Since the additional collateral requirement (CNY 2,200,000) is less than the minimum transfer amount (CNY 2,500,000), no collateral transfer is required. **Step 5: Apply rounding (if applicable)** - Rounding amount = CNY 10,000 - Even if we rounded the amount, it would still be below the MTA, so no transfer occurs. Therefore, the hedge fund does not need to post any additional collateral.
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An investment bank has a one-way credit support annex (CSA) on a bilateral transaction with a hedge fund counterparty. Under the terms of the CSA, the mark-to-market value of the transaction forms the basis of the hedge fund's collateral requirements, which are provided below:
| Value (CNY) | |
|---|---|
| Mark-to-market value of net exposure | 25,000,000 |
| Mark-to-market value of collateral posted | 10,800,000 |
| Threshold amount | 14,000,000 |
| Minimum transfer amount | 2,500,000 |
| Rounding amount | 10,000 |
Assuming the net exposure increases to CNY 27,000,000 and the mark-to-market value of collateral posted has not changed, how much additional collateral will the hedge fund have to post?
A
CNY 0
B
CNY 1,990,000
C
CNY 2,000,000
D
CNY 2,500,000