Template:M summ 2002 ISDA Applicable Close-out Rate: Difference between revisions

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Truly from the {{isia}} file — almost in the [[shoot me]] file. This whole game of pan-dimensional chess, with six different interest rates to apply in different circumstances, is all just to work out how to accrue interest on {{isdaprov|Unpaid Amount}}s and {{isdaprov|Early Termination Amount}}s when closing out. You get a strong sense that the pragmatists of {{icds}} — if there are any — had well and truly tuned out and gone to the bar by the the ’squad got to this definition. Looking on the bright side, ''at least it doesn’t mention [[LIBOR]]''.<ref>[[File:Dramatic Chipmunk.png|left|100|thumb|Did someone say ''[[LIBOR]]''?]]</ref>
{{isda Applicable Close-out Rate summ|isdaprov}}
 
You have the {{isdaprov|Default Rate}}, the {{isdaprov|Non-default Rate}}, the {{isdaprov|Applicable Deferral Rate}}, and the {{isdaprov|Termination Rate}}. Depending on how and why you have closed out the {{2002ma}}, and whether you were at fault, a different rate will apply.
 
The four rates are:
*{{Nutshell 2002 ISDA Default Rate}}
*{{Nutshell 2002 ISDA Non-default Rate}}
*{{Nutshell 2002 ISDA Termination Rate}}
All sensible enough, if not a little over-determined — and then the ''three'' “'''{{isdaprov|Applicable Deferral Rate}}s'''”, which convert this from something that is merely [[tedious]] to the stuff of a [[Hieronymus Bosch nightmare]].

Latest revision as of 14:41, 3 January 2024

Truly from the I’m sorry I asked file — almost in the shoot me file. This whole game of pan-dimensional chess, with six different Applicable Close-out Rates to apply in different circumstances, is all just to work out how to accrue interest on Unpaid Amounts and Early Termination Amounts during the close-out process. Considering that the said payer of this Applicable Close-out Rate is, Q.E.D., a dead duck at the time, and is unlikely to be able to pay much of anything, let alone elevated penalty interest, it really should not have been this hard.

You get a strong sense that the pragmatists of ISDA’s crack drafting squad™ — if there are any — had well and truly tuned out and gone to the bar by the ’squad got to this definition. Looking on the bright side, at least it doesn’t mention LIBOR.

Non-Default Rate

To compare with the definition of “Default Rate”:

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. [emphasis added]

Since there is no suggestion of deftly placing one’s thumb on the scale, as there is for the Default Rate, we need not have, here, a saucy discussion about the risks of being seen as a penalty.

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