Interest Amount - CSA Provision: Difference between revisions
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*the last paragraph contemplates currencies other than [[sterling]] having an [[Act/365]] [[day count fraction]]; | *the last paragraph contemplates currencies other than [[sterling]] having an [[Act/365]] [[day count fraction]]; | ||
*The {{csaprov|Negative Interest}} guff. | *The {{csaprov|Negative Interest}} guff. | ||
{{Interest adjustment and interest transfer}} |
Revision as of 10:55, 22 February 2017
CSA Anatomy™
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provided that, unless “Negative Interest” is specified as applicable in Paragraph 11(g)(iii), if the Interest Amount (VM) for an Interest Period would be a negative amount, it will be deemed to be zero.
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The sole observable changes between the 1995 CSA and the 2016 VM CSA are, as best as this poor boy can fathom, these:
- the (rather tedious) expression “... on the principal amount of the portion of the Credit Support Balance” amount has been massaged to the slightly more elegant “...on the portion of the Credit Support Balance”, although you’d have to say this is mostly likely to be a drafting error rather than some kind of late-life Damascene conversion in ISDA's part to the merits of plain English;
- the last paragraph contemplates currencies other than sterling having an Act/365 day count fraction;
- The Negative Interest guff.
One might query whether “Daily Interest Compounding” should apply.
Interest compounds anyway at the end of each specified interest period (because it is paid out or added to the Credit Support Balance (VM), depending on which election you made at {{{{{1}}}|11(g)(ii)}}. If that period is “daily” then there's nothing really to be gained by {{{{{1}}}|Daily Interest Compounding}}. If the {{{{{1}}}|Interest Period}} is longer than that, there may be — but in the present environment (which, as those of you who lived through the Weimar Republic[1] may recall, CAN MOST DEFINITELY CHANGE) — the thought of daily compounding 1/365th of the bugger all interest you're getting paid anywaymight seem like a fight it’s not worth dying in a ditch about[2].