## Trade

Vanilla swap portfolio consists of 50 USD interest rate swaps; fixed coupons (2%) paid semi-annually, floating coupons paid quarterly.

Cross currency swap portfolio consists of 50 cross-currency rate swaps; fixed EUR coupons (3%) paid semi-annually, floating USD coupons paid quarterly.

## Model

Scenarios computed by uncorrelated Hull-White models for the interest rates, with the initial USD and EUR yield curves flat at 2% and 1%, respectively, Gaussian (basis point) volatilities of 1%, and mean reversion speeds of 5%. The exchange rate is log-normal, with USD/EUR spot at 1.2 and a constant FX diffusion volatility of 10%.

Note: as the FX rate has random drift (due to the volatility of the USD and EUR interest rates), the implied FX volatility is, of course, larger than the diffusion volatility.

## Exposure

Expected exposures are computed by brute-force daily simulation using Conservative calibration with and without initial margin protection. The margin agreement uses daily margin transfers, no thresholds, and no MTA/rounding. The initial margin level is estimated using 10-day model VaR. It is further assumed that no initial margin is returned to the counterparty during MPR.