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In the above example, what would maturity (M) equal if the customers exposures were not covered under an International Swaps and Derivatives Association (ISDA) agreement?

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In the above example, what would maturity (M) equal if the customers exposures were not covered under an International Swaps and Derivatives Association (ISDA) agreement?

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If the two transactions are not covered under an ISDA master netting agreement, they would be treated as two separate transactions: one with a maturity of one year, and the second with a maturity of five years. However, the net effect on M is the same as if two transactions were subject to a master netting agreement: assuming the two exposures are slotted into the same probability of default (PD)/loss given default (LGD) bucket, M for that bucket is calculated as a weighted-average maturity for the exposures in that bucket.

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