In general, terms in this Standard have the meanings defined in other Regulations and Standards issued by the Central Bank. In addition, for this Standard, the following terms have the meanings defined in this section.

• •A basis transaction is a non-foreign-exchange (that is, denominated in a single currency) transaction in which the cash flows due to one counterparty depend on a risk factor that differs from the risk factor (from the same asset class) that determines payments due to the other counterparty.
• •A central counterparty (CCP) is an entity that interposes itself between counterparties to contracts traded within one or more financial markets, becoming the legal counterparty such that it is the buyer to every seller and the seller to every buyer.
• •A centrally cleared derivative transaction is a derivatives transaction that is cleared though a central counterparty.
• •A clearing member is an entity that conducts transactions through a central counterparty as a member of that central counterparty.
• •A commodity type is a set of commodities that have broadly similar risk drivers, such that the prices or volatilities of commodities of the same commodity type may reasonably be expected to move with similar direction and timing and to bear predictable relationships to one another.
• •Counterparty credit risk is the risk of loss due to a failure by a counterparty to an in-scope transaction to deliver to the bank according to contractual terms at settlement.
• •A hedging set is a set of transactions within a single netting set exposed to similar risk factors, and for which partial or full offsetting may be recognized in the calculation of the potential future exposure add-on.
• •The independent collateral amount (ICA) is collateral posted by a counterparty that the bank may seize upon default of the counterparty. ICA may be defined by the Independent Amount parameter in standard industry documentation. ICA may change in response to factors such as the value of the collateral or a change in the number of transactions in the netting set, but (unlike variation margin) not in response to the value of the transactions it secures.
• •A long settlement transaction is one in which a counterparty undertakes to deliver a security, commodity, or foreign exchange amount against cash, other financial instruments, or commodities at a contractually specified settlement or delivery date that exceeds the market standards for settlement or delivery of the particular instrument, or if that settlement date is more than five business days from the date the transaction is initiated.
• •The margin period of risk for a derivatives contract is the length of time from the last exchange of collateral covering a netting set until transactions with a defaulting counterparty can be closed out and the resulting risk re-hedged.
• •Margined transactions are those in which variation margin is exchanged between counterparties; other transactions are un-margined.
• •Net Current Value (NCV) for a netting set is the total current market value of all transactions (which may be negative) minus the net value of any collateral held by a bank, after application of any collateral haircuts.
• •The net independent collateral amount (NICA) is the difference between the ICA posted by a counterparty and any ICA posted by the bank for that counterparty, excluding any collateral that the bank has posted to a segregated, bankruptcy remote account.
• •Netting by novation refers to a netting arrangement in which any obligation between two counterparties to deliver a given currency on a given value date is automatically combined with all other obligations for the same currency and value date, legally substituting one single amount for the previous gross obligations.
• •A netting set is a group of contracts with a single counterparty subject to a legally enforceable agreement for net settlement, and satisfying all of the conditions for netting sets specified in this Standard.
• •Potential Future Exposure (PFE) is an estimate of the potential increase in exposure to counterparty credit risk against which regulatory capital must be held.
• •A Qualifying Central Counterparty (QCCP) is a CCP that meets certain qualification requirements articulated in this Standard.
• •The remaining maturity of a derivative transaction is the time remaining until the latest date at which the contract may still be active. If a derivative contract has another derivative contract as its underlying (for example, a swaption) and may be physically exercised into the underlying contract (that is, a bank would assume a position in the underlying contract in the event of exercise), then the remaining maturity of the contract is the time until the final settlement date of the underlying derivative contract. For a derivative contract that is structured such that any outstanding exposure is settled on specified dates and the terms are reset so that the fair value of the contract is zero, the remaining maturity equals the time until the next reset date.
• •Variation margin (VM) means margin in the form of cash or financial assets exchanged on a periodic basis between counterparties to recognize changes in contract value due to changes in market factors.
• •A volatility transaction is one in which the settlement amount of the contract depends on the level of volatility of a risk factor.
• •A bank’s position in a particular trade or transaction is long or long in the primary risk factor if the market value of the transaction increases when the value of the primary risk factor increases; alternatively, the position is short or short in the primary risk factor if the market value of the transaction decreases when the value of the primary risk factor increases.