Template:Deliveryandreturnamounts: Difference between revisions

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===Calculating {{csaprov|Delivery Amount}}s and {{csaprov|Return Amount}}s===
====Delivery Amounts====
# '''First''': work out your '''{{csaprov|Credit Support Amount}}'''. This is: <br>
:''{{csaprov|Transferee}}’s {{csaprov|Exposure}} + Net {{csaprov|Independent Amount}}s (IF ANY)<ref>In the {{2016csa}} there really shouldn't be {{tag|IA}} as it kind of defeats the regulatory goal of marking actual exposures to market, but there may be, since ISDA caved and retrofitted the CSA with a an Independent Amount section</ref>'' <br>
# '''Second''': calculate the {{csaprov|Value}} of the {{csaprov|Transferor}}’s {{csaprov|Credit Support Balance}}. This is basically the prevailing value of the {{csaprov|Eligible Credit Support}} (and income on it) that the {{csaprov|Transferor}} has ponied up at that time. <br>
# '''Third''': Deduct the {{csaprov|Credit Support Balance}} from the {{csaprov|Credit Support Amount}}.
# '''Fourth''': If the difference from the sum you did in (3):
##is  ''less'' than zero, KEEP QUIET. If you are lucky, the other guy won’t ask you for a {{csaprov|Return Amount}}.
##is ''more'' than zero but ''less'' than the {{csaprov|Minimum Transfer Amount}}, also KEEP QUIET. No {{csaprov|Delivery Amount}} for you today.
##is ''more'' than the {{csaprov|Minimum Transfer Amount}} you can demand the whole amount (I.e., not just the bit over the {{csaprov|MTA}}).


===={{csaprov|Return Amount}}====
Basically the converse of a {{csaprov|Delivery Amount}}. In this case you deduct the {{csaprov|Credit Support Amount}} from the {{csaprov|Credit Support Balance}}.
====What about in-flight {{csaprov|Credit Support}} deliveries?====
So yesterday you met a [[margin call]] by delivering a [[bond]] the standard [[settlement cycle]] for which means it won’t arrive till the day after tomorrow. How is this “in-flight collateral” treated for the purpose of today’s [[margin call]]? It’s treated as having already been made. However, if your [[counterparty]] fails in the meantime (before the [[bond]] has settled, and assuming ultimately it never does), it would count as an {{isdaprov|Unpaid Amount}} which would factor into your [[Close-out Amount - ISDA Provision|close-out calculation]].
At first blush this seems an odd result, but the risk is a time value risk associated with the collateral, not a counterparty risk per se. You accepted it when you agreed to {{csaprov|Eligible Credit Support}} with a long a [[settlement cycle]] in the first place. If you don't want that time-value risk, don’t agree to collateral with a long [[settlement cycle]].
====Picturesque speech====
''Bonus learning for free: In a subtraction, the sum being subtracted is the [[subtrahend]] and the sum it is being subtracted from is the [[minuend]].'' <br>

Latest revision as of 10:10, 13 May 2024

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