Consider a netting set with three credit derivatives: one long single-name CDS written on Firm A (rated AA), one short single-name CDS written on Firm B (rated BBB), and one long CDS index (investment grade). All notional amounts and market values are denominated in USD. This netting set is not subject to a margin agreement and there is no exchange of collateral (independent amount/initial margin) at inception. The table below summarizes the relevant contractual terms of the three derivatives.

According to the Standards, the EAD for un-margined netting sets is given by:

EAD = 1.4 * (RC + PFE)