Template:Deliveryandreturnamounts: Difference between revisions

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===Calculating {{{{{1}}}prov|Delivery Amount}}s and {{{{{1}}}prov|Return Amount}}s===
===={{{{{1}}}prov|Delivery Amount}}s====
'''First''': work out your '''{{{{{1}}}prov|Credit Support Amount}}'''. This is: <br>
:''{{{{{1}}}prov|Transferee}}’s {{{{{1}}}prov|Exposure}} + Net {{{{{1}}}prov|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 {{2016csa}} with a an {{vmcsaprov|Independent Amount}} section</ref>'' <br>
'''Second''': calculate the {{{{{1}}}prov|Value}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}}. This is basically the prevailing value of the {{{{{1}}}prov|Eligible Credit Support}} (and income on it) that the {{{{{1}}}prov|Transferor}} has ponied up at that time. <br>
'''Third''': Deduct the {{{{{1}}}prov|Credit Support Balance}} from the {{{{{1}}}prov|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 {{{{{1}}}prov|Return Amount}}.
:is ''more'' than zero but ''less'' than the {{{{{1}}}prov|Minimum Transfer Amount}}, also KEEP QUIET. No {{{{{1}}}prov|Delivery Amount}} for you today, because you haven’t exceeded the {{{{{1}}}prov|Minimum Transfer Amount}}, so you are not entitled to one.
:is ''more'' than the {{{{{1}}}prov|Minimum Transfer Amount}} you can demand the ''whole'' amount (I.e., not just the bit over the {{{{{1}}}prov|MTA}}).
===={{{{{1}}}prov|Return Amount}}s====
Basically the converse of a {{{{{1}}}prov|Delivery Amount}}. In this case you deduct the {{{{{1}}}prov|Credit Support Amount}} from the {{{{{1}}}prov|Credit Support Balance}}.
====What about in-flight {{{{{1}}}prov|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 {{{{{1}}}prov|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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