(1) An Authorised Firm^G must determine the maturity of the underlying Exposure^G and the maturity of the Credit Risk^G mitigant conservatively. The residual maturity of the underlying Exposure^G must be gauged as the longest possible remaining time before the Counterparty^G is scheduled to fulfil its obligation, taking into account any applicable grace period.

(2) In the case of Credit Risk^G mitigant, embedded options which may reduce the term of the credit protection must be taken into account so that the shortest possible residual maturity is used. Where a call is at the discretion of the protection seller, the residual maturity will be at the first call date. If the call is at the discretion of the Authorised Firm^G but the terms of the arrangement at origination of the Credit Derivative^G contain a positive incentive for the Authorised Firm^G to call the transaction before contractual maturity, the remaining time to the first call date will be deemed to be the residual maturity.