Template:CSA Transfer Description: Difference between revisions

Template:CSA Transfer Description (view source)

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 This is how the timing works for CSA transfers. Remember the {{{{{1}}}prov|Valuation Agent}} is simply the person making the demand. Terminology check: to make this easy we refer to both {{{{{1}}}prov|Delivery Amount}}s ''and'' {{{{{1}}}prov|Return Amount}}s as “'''{{{{{1}}}prov|Transfer Amount}}s'''”. The date on which someone actually demands a Transfer Amount we call a “'''{{{{{1}}}prov|Demand Date}}'''”.
-'''Valuation of {{{{{1}}}prov|Exposure}} and {{{{{1}}}prov|Credit Support Balance}}''': Firstly, you must value what you are going to call. This is {{{{{1}}}prov|Credit Support Balance}} - {{{{{1}}}prov|Exposure}} (or vice versa).Per para {{{{{1}}}prov|2(a)}} the Transferor will transfer {{{{{1}}}prov|Eligible Credit Support}} having a {{{{{1}}}prov|Value}} equal to the {{{{{1}}}prov|Transfer Amount}} ''as of the date of transfer''.  Under the {{{{{1}}}prov|Calculations}} provision all calculations happen at the relevant {{{{{1}}}prov|Valuation Time}}. Fluctuations in value after that time won’t invalidate the {{{{{1}}}prov|Transfer Amount}}, but they may mean a party can immediately call for more {{{{{1}}}prov|Credit Support}} (that is, have ''another'' {{{{{1}}}prov|Demand Date}}). The {{{{{1}}}prov|Valuation Time}} in turn keys off the {{{{{1}}}prov|Valuation Date}}.<ref>Under the {{csa}} you may specify either [[close of business]] on the {{csaprov|Valuation Date}} or the {{csaprov|Local Business Day}} immediately ''before'' it. Under the {{vmcsa}} you have flexibility to determine the {{vmcsaprov|Valuation Time}} as at the point you your book each day.</ref>
+'''Valuation of {{{{{1}}}prov|Exposure}} and {{{{{1}}}prov|Credit Support Balance}}''': Firstly, you must value what you are going to call, which wiull be the Transfer Amount under para {{{{{1}}}prov|2(a)}} or {{{{{1}}}prov|2(b)}}. This is roughly {{{{{1}}}prov|Credit Support Balance}} - {{{{{1}}}prov|Exposure}} (or ''vice versa'').
+Per para {{{{{1}}}prov|2(a)}} the {{{{{1}}}prov|Transferor}} will transfer {{{{{1}}}prov|Eligible Credit Support}} having a {{{{{1}}}prov|Value}} equal to the {{{{{1}}}prov|Transfer Amount}} ''as of the date of transfer''.  Under the {{{{{1}}}prov|Calculations}} provision all calculations happen at the relevant {{{{{1}}}prov|Valuation Time}}. Fluctuations in value after that time won’t invalidate the {{{{{1}}}prov|Transfer Amount}}, but they may mean a party can immediately call for more {{{{{1}}}prov|Credit Support}} (that is, have ''another'' {{{{{1}}}prov|Demand Date}}). The {{{{{1}}}prov|Valuation Time}} in turn keys off the {{{{{1}}}prov|Valuation Date}}.<ref>Under the {{csa}} you may specify either [[close of business]] on the {{csaprov|Valuation Date}} or the {{csaprov|Local Business Day}} immediately ''before'' it. Under the {{vmcsa}} you have flexibility to determine the {{vmcsaprov|Valuation Time}} as at the point you your book each day.</ref>
 '''{{{{{1}}}prov|Demand Date}}''':  On any date that is (or promptly follows) a {{{{{1}}}prov|Valuation Date}}<ref>It need not be a {{{{{1}}}prov|Local Business Day}}.</ref> in which the {{{{{1}}}prov|Exposure}} has moved in its favour, one party may demand a {{{{{1}}}prov|Delivery Amount}}<ref>Under para {{{{{1}}}prov|2(a)}}</ref> or a {{{{{1}}}prov|Return Amount}}.<ref>Under para {{{{{1}}}prov|2(b)}}</ref>
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 {{quote|“...the {{{{{1}}}prov|Value}} as of that {{{{{1}}}prov|Valuation Date}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}} (adjusted to include any prior {{{{{1}}}prov|Delivery Amount}} and to exclude any prior {{{{{1}}}prov|Return Amount}}, the transfer of which, in either case, has not yet been completed and for which the relevant {{{{{1}}}prov|Settlement Day}} falls on or after such {{{{{1}}}prov|Valuation Date}}).”}}
-This leads to some rather anomalous results.
+'''What if I have to pay out a {{{{{1}}}prov|Transaction}} {{{{{1}}}prov|Termination Amount}} which the counterparty is already holding all or some of by way of {{{{{1}}}prov|Variation Margin}}?''' I can just off set those, right? ''Wrong''. See our [[Transaction terminations and VM|separate article]] on that issue.