A measure that is used to determine exposure at default (EAD) for OTC derivatives under a bank’s internal model method. Effective expected positive exposure (EEPE) is calculated as the weighted average of non-decreasing expected positive exposures.

An exposure’s weight is calculated as a percentage of total expected exposure (EE) over the relevant period. In calculation of the minimum capital requirement for a bank, the average is taken over the first year. The weighted average is calculated over time of effective expected exposure over the first year, or over the time period of the longest maturity contract in the netting set (of such derivatives) where the weights reflect the proportion that an individual expected exposure represents of the entire time interval.