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| Section {{isdaprov|1}} is a gentle introduction indeed to the dappled world of the {{isdama}}: much coming from the “goes without saying, but let’s say it anyway” dept — a large department indeed, in the annals of modern legal practice. But not the {{isdaprov|Single Agreement}} part. That’s important — by some lights, the main reason one even has an {{isdama}}: it vouchsafes your [[close-out netting]] analysis, purporting to inextricably bind together all {{isdaprov|Transaction}}s under the {{isdama}} as part of a single, concerted, nettable whole. Should (God forbid) your counterparty have imploded, an unthinking administrator might feel the three-year jet fuel swap you traded in July 2012 had nothing really to do with your six-month interest rate swap from February last year and when it comes to considering who owes who what, the two should be treated as separate, unitary transactions. It might think this quite enthusiastically, if one of those transactions happens out-of-the-money to you, and the other one in-the-money. | | Section {{isdaprov|1}} is a gentle introduction indeed to the dappled world of the {{isdama}}: much coming from the “goes without saying, but let’s say it anyway” dept — a large department indeed, in the annals of modern legal practice. It stsarts getting a bit tasty in Section {{isdaprov|1(c)}} with the {{isdaprov|Single Agreement}} part, but it’s not until the Section {{isdaprov|2(a)(iii)}} [[flawed asset]] provision that you’re properly in the twilight zone. |
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| “Why, that’s dashed bad luck, old man! You have to pay me that out-of-the-money exposure<ref>Yes I know: Section {{isdaprov|2(a)(iii)}}. We’ll get to that. And in some jurisdictions mandatory [[insolvency set-off]] would also spike an administrator’s guns. But for now, let’s say.</ref> and while this dead parrot owes you on the other trade, the end of the creditors’ queue is that one you can see over there in the far distance, should you have a telescope on you.”
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| You might be inclined to say, “but wait: we should be able to set these off surely! This is all the same stuff, right! Swaps! They all go together! They’re not unitary transactions at all!”
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| Well, Section {{isdaprov|1(c)}} — tho one that says “it ''is'' all a single agreement, and we would never have done ''any'' of this if we had thought for a moment it might not be, and to prove it we are saying this out loud at the very inception of our derivatives relationship” is your friend in making that argument. There are similar provisions in other agreements, but none is so classic or elegant as the {{isdama}}’s
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| In a nutshell: DO NOT ADJUST THIS PROVISION. Why would you? | | In a nutshell: DO NOT ADJUST THIS PROVISION. Why would you? |
Section 1 is a gentle introduction indeed to the dappled world of the ISDA Master Agreement: much coming from the “goes without saying, but let’s say it anyway” dept — a large department indeed, in the annals of modern legal practice. It stsarts getting a bit tasty in Section 1(c) with the Single Agreement part, but it’s not until the Section 2(a)(iii) flawed asset provision that you’re properly in the twilight zone.
In a nutshell: DO NOT ADJUST THIS PROVISION. Why would you?