Template:Csa IA Threshold MTA comp: Difference between revisions
Amwelladmin (talk | contribs) (Created page with "Even when it was just about {{{{{1}}}|Threshold}}s, this was one of the most popular pages on this whole site. Even more popular than the one about Toto. And Rick Astley. Now we have wrapped in all this stuff about IA and MTA we expect it to be bringing down servers from Bucharest to Belgium. Go figure, my little contrarians. Okay. Now in a CSA, beyond your basic Exposure and how much {{{{{1}}}|Credit Support}} you have already posted, there are three levers d...") |
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Okay. Now in a CSA, beyond your basic Exposure and how much {{{{{1}}}|Credit Support}} you have already posted, there are three levers determining what you will have to post, or may call, in the future. These are: | Okay. Now in a CSA, beyond your basic Exposure and how much {{{{{1}}}|Credit Support}} you have already posted, there are three levers determining what you will have to post, or may call, in the future. These are: | ||
{{L1}}'''Independent Amount''': How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice. <li> | {{L1}}'''{{{{{1}}}|Independent Amount}}''' or “'''{{{{{1}}}|IA}}'''”: How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice. <li> | ||
'''Threshold''': Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin. <li> | '''{{{{{1}}}|Threshold}}''': Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin. <li> | ||
'''{{{{{1}}}|Minimum Transfer Amount}}''': Assuming you are over your Threshold, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?</ol> | '''{{{{{1}}}|Minimum Transfer Amount}}''' or “'''{{{{{1}}}|MTA}}'''”: Assuming you are over your {{{{{1}}}|Threshold}}, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?</ol> | ||
These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as [[initial margin]]: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to ''never'' post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd [[Non-financial counterparty|NFC]] in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for. | These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as [[initial margin]]: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to ''never'' post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd [[Non-financial counterparty|NFC]] in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for. | ||
Revision as of 14:35, 26 June 2024
Even when it was just about {{{{{1}}}|Threshold}}s, this was one of the most popular pages on this whole site. Even more popular than the one about Toto. And Rick Astley. Now we have wrapped in all this stuff about IA and MTA we expect it to be bringing down servers from Bucharest to Belgium. Go figure, my little contrarians.
Okay. Now in a CSA, beyond your basic Exposure and how much {{{{{1}}}|Credit Support}} you have already posted, there are three levers determining what you will have to post, or may call, in the future. These are:
- {{{{{1}}}|Independent Amount}} or “{{{{{1}}}|IA}}”: How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice.
- {{{{{1}}}|Threshold}}: Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin.
- {{{{{1}}}|Minimum Transfer Amount}} or “{{{{{1}}}|MTA}}”: Assuming you are over your {{{{{1}}}|Threshold}}, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?
These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as initial margin: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to never post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd NFC in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for.