|
|
| (16 intermediate revisions by the same user not shown) |
| Line 1: |
Line 1: |
| The actual wording is in that box on the left hand side, but you may find it easier to read the nutshell summary, since the new 2016 version ISDA not only passed up the opportunity to make this never-used-in-practice language simpler, but it actually made it more complicated by providing alternatives for {{2002ma}} and {{1992ma}} close-out methodologies. Which is just spectacular.
| | #redirect[[Dispute Resolution - CSA Provision]] |
| {{Nuts|4(a)|1995 CSA}}<br>
| |
| {{csaprov|Disputed Calculations or Valuations}} is a topic that could unfurl like the flower of a deadly insect-eating nightshade if you let it. DON’T LET IT.
| |
| {{fullanatopen|csa|
| |
| {{csasnap|4(a)|1995}}
| |
| {{csasnap|4(a)|2016}}
| |
| }}
| |
| The dispute can be as to one of two things:
| |
| *The {{csaprov|Value}} of posted (or to-be-transferred) {{csaprov|Eligible Credit Support}}; or
| |
| *The {{isdaprov|Transaction}} {{csaprov|Value}} (when calculating {{csaprov|Exposure}}).
| |
| | |
| Let's take the easy one first: {{csaprov|Eligible Credit Support}}. If you are a smart sort of fellow who has moved onto a cash-only single-currency {{2016csa}} then there’s not really much to argue about. What is the {{csaprov|Value}}, in the {{csaprov|Base Currency}}, of an amount in the {{csaprov|Base Currency}}?
| |
| | |
| The {{isdaprov|Transaction}} {{isdaprov|Exposure}} has —potentially — a different complexion. While some asset classes ([[FX]], [[synthetic equity]]) are pretty observable and, in the same way, there is not much to argue about, others are not. The less liquid a transaction is, the less likely the broker is to refuse any dispute rights when carrying out its {{isdaprov|Calculation Agent}} function under the {{tag|ISDA}}.
| |
| | |
| So doesn't the self-help valuation model under the CSA drive a [[Coach & Horses|coach and horses]] through the carefully constructed {{isdaprov|Calculation Agent}} language on which the [[broker]] counterparty has just insisted, to the point of threatening to die in a ditch about it?
| |
| | |
| It may seem so, but in practice no. Firstly, the dispute mechanism in the CSA, while fulsome, reflects the uncynical attitude of yesteryear in its aspirations for what Third party {{isdaprov|Reference Market-Makers}} will be prepared to do to help a fellow market participant out. It depends on the better angels of a {{isdaprov|Reference Market-maker}}’s nature — neigh, ''four'' of the blighters — in providing firm quotations to be dissected, arithmetically averaged and arranged for the delight of all. But a moment’s reflection should tell you that a {{isdaprov|Reference Market-maker}} doesn’t ''have'' a better nature. Such a chap is certain not to provide a quote, which brings them no benefit (they can’t get a trade out of it).
| |
| | |
| ''[to be continued]''
| |