Portfolio of 50 cross-currency rate swaps; fixed EUR coupons (3%) paid semi-annually, floating USD coupons paid quarterly.
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.
Expected exposures are computed by brute-force daily simulation using Conservative and Aggressive calibrations. The margin agreement uses daily margin transfers, no thresholds, and no MTA/rounding.