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Template:Csa Events of Default summ: Difference between revisions
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====Why do {{ttcsa}}s reference “Unpaid Amounts”?==== | ====Why do {{ttcsa}}s reference “Unpaid Amounts”?==== | ||
A {{ttcsa}} is technically {{isdaprov|Transaction}} | A {{ttcsa}} is technically a {{isdaprov|Transaction}} under the {{isdama}} in its own right — that is deep [[ISDA]] lore — but it is still a ''weird'' {{isdaprov|Transaction}}, and the standard “[[replacement cost]]” of valuation method doesn’t work brilliantly: rather than having defined payments upfront, each of which can be valued and discounted back to now to reveal a [[present value]], payment obligations under a {{ttcsa}} depend on the aggregate discounted cashflows of all the ''other'' {{isdaprov|Transaction}}s under the {{isdama}}. So good luck determining, in the abstract, the [[replacement cost]] of something like that. | ||
The good news is you don’t have to: the {{{{{1}}}|Credit Support Balance}} isn’t calculated by reference to its own discounted future cashflows: rather, it is just the inverse of the aggregate present value of all the other {{isdaprov|Transactions}} under the {{isdama}}. So the “[[replacement cost]]” on any day is just the prevailing value of the {{{{{1}}}|Credit Support Balance}}. It’s easier to treat that as an {{isdaprov|Unpaid Amount}} (none of this tedious mucking about with replacement costs and so on). | The good news is you don’t have to: the {{{{{1}}}|Credit Support Balance}} isn’t calculated by reference to its own discounted future cashflows: rather, it is just the inverse of the aggregate present value of all the other {{isdaprov|Transactions}} under the {{isdama}}. So the “[[replacement cost]]” on any day is just the prevailing value of the {{{{{1}}}|Credit Support Balance}}. It’s easier to treat that as an {{isdaprov|Unpaid Amount}} (none of this tedious mucking about with replacement costs and so on). | ||