Template:Exposure under csa: Difference between revisions
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===Relevance of Section {{isdaprov|6}} to the peacetime operation of the {{csa}}=== | ===Relevance of Section {{isdaprov|6}} to the peacetime operation of the {{csa}}=== | ||
The calculation of Exposure under the {{csa}} is modelled on the Section {{isdaprov|6(e)(ii)}} termination methodology following a {{isdaprov|Termination Event}} where there is one {{isdaprov|Affected Party}}, which in turn tracks the Section {{isdaprov|6(e)(i)}} methodology following an {{isdaprov|Event of Default}}, only taking [[mid-market valuation]]s and not those on the {{isdaprov|Non-Defaulting Party}}’s side. | The calculation of Exposure under the {{csa}} is modelled on the Section {{isdaprov|6(e)(ii)}} termination methodology following a {{isdaprov|Termination Event}} where there is one {{isdaprov|Affected Party}}, which in turn tracks the Section {{isdaprov|6(e)(i)}} methodology following an {{isdaprov|Event of Default}}, only taking [[mid-market valuation]]s and not those on the {{isdaprov|Non-Defaulting Party}}’s side. | ||
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::(c) {{isdaprov|Unpaid Amounts}} due to the Defaulting Party.<br> | ::(c) {{isdaprov|Unpaid Amounts}} due to the Defaulting Party.<br> | ||
This is interesting because, as of its {{isdadefsprov|Termination Date|2006}} the {{isdaprov|Transaction}} may be no more, but until those final exchanges are settled the obligations they represent — Unpaid | This is interesting because, as of its {{isdadefsprov|Termination Date|2006}} the {{isdaprov|Transaction}} may be no more, but until those final exchanges are settled the obligations they represent — “{{isdaprov|Unpaid Amount}}s” in the argot of Section {{isdaprov|6(e)}} — still exist and are included in the calculation of the {{csaprov|Exposure}}. | ||
Now, on the day you are meant to pay that final payment, which when (ahem — ''if'') settled, you would expect to reduce your exposure to reduce, but you will call for credit support assuming it has not been paid. By the time the | |||
Revision as of 15:19, 6 November 2018
Relevance of Section 6 to the peacetime operation of the 1995 CSA
The calculation of Exposure under the 1995 CSA is modelled on the Section 6(e)(ii) termination methodology following a Termination Event where there is one Affected Party, which in turn tracks the Section 6(e)(i) methodology following an Event of Default, only taking mid-market valuations and not those on the Non-Defaulting Party’s side.
This means you calculate the Exposure as:
- (a) the Close-out Amounts for each Terminated Transaction plus
- (b) Unpaid Amounts due to the Non-defaulting Party; minus
- (c) Unpaid Amounts due to the Defaulting Party.
- (a) the Close-out Amounts for each Terminated Transaction plus
This is interesting because, as of its Termination Date the Transaction may be no more, but until those final exchanges are settled the obligations they represent — “Unpaid Amounts” in the argot of Section 6(e) — still exist and are included in the calculation of the Exposure.
Now, on the day you are meant to pay that final payment, which when (ahem — if) settled, you would expect to reduce your exposure to reduce, but you will call for credit support assuming it has not been paid. By the time the