Template:Dust capsule: Difference between revisions
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{{isdaprov|Default | {{isdaprov|Default upon Specified Transaction}} — colloquially, “{{isdaprov|DUST}}” — is often confused with {{isdaprov|Cross Default}}. In fact, they’re ''meant'' to be mutually exclusive. That won’t stop folks conflating them, though. Look, we all do it. | ||
{{isdaprov|DUST}} is ''like'' {{isdaprov|Cross Default}}, but where {{isdaprov|Cross Default}} references indebtedness owed to third parties, {{isdaprov|DUST}} is all about ''non''-“borrowing” style transactions — e.g., [[swap|swap agreements]], [[stock loan]]s<ref>I know these ''sound'' like borrowing transactions, but they’re fully collateralised, and in fact aren’t.</ref> and [[repo]]s, '''but only transactions between the two counterparties'''<ref>And — sigh — their {{isdaprov|Credit Support Provider}}s and {{isdaprov|Specified Entities}}.</ref>. | {{isdaprov|DUST}} is ''like'' {{isdaprov|Cross Default}}, but where {{isdaprov|Cross Default}} references indebtedness owed to third parties, {{isdaprov|DUST}} is all about ''non''-“borrowing” style transactions — e.g., [[swap|swap agreements]], [[stock loan]]s<ref>I know these ''sound'' like borrowing transactions, but they’re fully collateralised, and in fact aren’t.</ref> and [[repo]]s, '''but only transactions between the two counterparties'''<ref>And — sigh — their {{isdaprov|Credit Support Provider}}s and {{isdaprov|Specified Entities}}.</ref>. | ||
If a [[Counterparty]]<ref>Or — sigh — its {{isdaprov|Credit Support Provider}} or {{isdaprov|Specified Entity}}</ref> experiences an {{isdaprov|Event of Default}} under a [[swap]] agreement (or other “{{isdaprov|Specified Transaction}}”<ref>This is typically wide, though it excludes [[borrowed money]] — but check the Agreement!</ref> with you, this will be an {{isdaprov|Event of Default}} under the {{isdama}}. | If a [[Counterparty]]<ref>Or — sigh — its {{isdaprov|Credit Support Provider}} or {{isdaprov|Specified Entity}}</ref> experiences an {{isdaprov|Event of Default}} under a [[swap]] agreement (or other “{{isdaprov|Specified Transaction}}”<ref>This is typically wide, though it excludes [[borrowed money]] — but check the Agreement!</ref> with you, this will be an {{isdaprov|Event of Default}} under the {{isdama}}. | ||
Revision as of 13:51, 25 February 2020
Default upon Specified Transaction — colloquially, “DUST” — is often confused with Cross Default. In fact, they’re meant to be mutually exclusive. That won’t stop folks conflating them, though. Look, we all do it.
DUST is like Cross Default, but where Cross Default references indebtedness owed to third parties, DUST is all about non-“borrowing” style transactions — e.g., swap agreements, stock loans[1] and repos, but only transactions between the two counterparties[2].
If a Counterparty[3] experiences an Event of Default under a swap agreement (or other “Specified Transaction”[4] with you, this will be an Event of Default under the ISDA Master Agreement.
- ↑ I know these sound like borrowing transactions, but they’re fully collateralised, and in fact aren’t.
- ↑ And — sigh — their Credit Support Providers and Specified Entities.
- ↑ Or — sigh — its Credit Support Provider or Specified Entity
- ↑ This is typically wide, though it excludes borrowed money — but check the Agreement!