The liquidation period is the number of days used to scale regulatory haircuts on collateral. It represents how long it would take to close out the trades and liquidate the collateral in a netting set following a counterparty default. A longer liquidation period means larger haircuts and therefore less collateral value recognised in the calculation.

In the world of OTC derivatives, collateral is the ultimate safety net against counterparty credit risk. To understand how capital requirements are calculated under the Standardised Approach for Counterparty Credit Risk (SA-CCR), we first need to distinguish between the two primary flavors of collateral:

The aggregate add-on is the sum of all six risk category add-ons. It represents the total potential future exposure across all asset classes in a netting set before the multiplier is applied. Each category is calculated independently using its own trades, supervisory factors, and hedging set structure, then they are simply summed.