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| Should a client request a transaction-specific parental guarantee under an {{isdama}} instead of the usual “all obligations” guarantee of all obligations under the {{isdama}} and all transactions under it, escalate immediately.
| | #redirect[[Credit Support Document - ISDA Provision]] |
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| '''Never''' agree to the guarantee of individual {{isdaprov|Transaction}}s (or accepting [[letter of credit|Letters of Credit]] with respect to individual transactions) under an [[ISDA]]. The reason relates to the way {{isdama}}s are closed out:
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| *On a close-out of an ISDA, each transaction is terminated, the individual close-out amounts are determined, they’re aggregated up to a single net sum (i.e. negative exposures are netted off against positive ones) and the single {{isdaprov|Early Termination Payment}} is payable under {{isdaprov|6(e)}} ({{isdaprov|Payments on Early Termination}}) of the {{isdama}}.
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| *That is to say, it is '''not''' payable under the {{isdaprov|Transaction}} at all - it's payable under the {{isdama}} itself.
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| *Therefore, if the guarantee relates to the single {{isdaprov|Transaction}} only, at precisely the point you wish to rely on it (i.e., upon that party’s default), it will vanish.
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| Same goes for Letters of Credit.
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| {{anat|isda}}
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Latest revision as of 08:11, 26 April 2020