Template:M summ 2002 ISDA Unpaid Amounts: Difference between revisions

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If you think of an ISDA transaction as comprising offsetting payment streams, these fall into one of three places:
If you think of an ISDA {{isdaprov|Transaction}} as comprising offsetting payment streams, these payments fall into one of three [[ontological]] categories:
*'''Been and gone''': Already paid: settled, gone, checked into the hereafter; on permanent location in that foreign country we call the past;
*'''Been and gone''': Those that are already paid: settled, gone, checked into the hereafter; on permanent location in that foreign country we call the past — we care less about these; they are but a fossil record: they pose no risk, attract no capital and excite no prospects of revenue or compensation.
*'''Yet to come''': Due to be paid, or delivered, at a specified date in the future. Perhaps fixed; perhaps yet to be determined, but conceptually still out there. It is, conventionally, by off setting the provisional present value of these future cashflows, that we value “the {{isdaprov|Transaction}}” — this is what we call its “[[Replacement Transaction - ISDA Provision|replacement cost]]”.
*'''Yet to come''': Due to be paid, or delivered, at a specified date in the future. Perhaps fixed; perhaps yet to be determined, but conceptually still out there. It is, conventionally, by off setting the provisional present value of these future cashflows, that we value “the {{isdaprov|Transaction}}” — this is what we call its “[[Replacement Transaction - ISDA Provision|replacement cost]]”.
*That weird inter-regnum of payments whose due date has passed, and who ''should have'' emigrated to that foreign country but, for whatever reason — either through inattention, inability, defiance, or the affordances of Section {{isdaprov|2(a)(iii)}} — they have not yet been made, so they need to be accounted for over and above the “replacement” value of the trade.  
*That weird inter-regnum of payments whose due date has passed, and which ''should have'' have been paid, and thus emigrated permanently to that foreign country but, for whatever reason — inattention, inability, defiance, or the affordances of Section {{isdaprov|2(a)(iii)}} — they have not yet been made, so they need to be worried about, accounted for and factored into things, over and above the “replacement” value of the trade.  


They are of interest in two cases: Default — clearly a significant possibility where a party is not meetings it oblighations as they fall due; and when taking credit support under the CSA, because they are of interest in calculating ones {{vmcsaprov|Exposure}}.
{{isdaprov|Unpaid Amount}}s are of interest in two cases:
* ''Default'' — obviously, they a significant possibility where a party is not meetings it obligations as they fall due; and  
* ''When taking credit support'' — because they must be remembered when calculating ones {{vmcsaprov|Exposure}}.


You may want to know where {{isdaprov|Unpaid Amounts}} feature in the {{isdama}}. The answer: In {{isdaprov|Payments on Early Termination}}: Section {{isdaprov|6(e)(i)}} (for {{isdaprov|Events of Default}}) and {{isdaprov|6(e)(ii)}} (for {{isdaprov|Termination Events}}) and {{isdaprov|6(e)(iv)}} ({{isdaprov|Adjustment for Illegality or Force Majeure Event}}).
You may want to know where {{isdaprov|Unpaid Amounts}} feature in the {{isdama}}. The answer: In {{isdaprov|Payments on Early Termination}}: Section {{isdaprov|6(e)(i)}} (for {{isdaprov|Events of Default}}) and {{isdaprov|6(e)(ii)}} (for {{isdaprov|Termination Events}}) and {{isdaprov|6(e)(iv)}} ({{isdaprov|Adjustment for Illegality or Force Majeure Event}}).

Revision as of 11:01, 24 May 2021

If you think of an ISDA Transaction as comprising offsetting payment streams, these payments fall into one of three ontological categories:

  • Been and gone: Those that are already paid: settled, gone, checked into the hereafter; on permanent location in that foreign country we call the past — we care less about these; they are but a fossil record: they pose no risk, attract no capital and excite no prospects of revenue or compensation.
  • Yet to come: Due to be paid, or delivered, at a specified date in the future. Perhaps fixed; perhaps yet to be determined, but conceptually still out there. It is, conventionally, by off setting the provisional present value of these future cashflows, that we value “the Transaction” — this is what we call its “replacement cost”.
  • That weird inter-regnum of payments whose due date has passed, and which should have have been paid, and thus emigrated permanently to that foreign country but, for whatever reason — inattention, inability, defiance, or the affordances of Section 2(a)(iii) — they have not yet been made, so they need to be worried about, accounted for and factored into things, over and above the “replacement” value of the trade.

Unpaid Amounts are of interest in two cases:

  • Default — obviously, they a significant possibility where a party is not meetings it obligations as they fall due; and
  • When taking credit support — because they must be remembered when calculating ones Exposure.

You may want to know where Unpaid Amounts feature in the ISDA Master Agreement. The answer: In Payments on Early Termination: Section 6(e)(i) (for Events of Default) and 6(e)(ii) (for Termination Events) and 6(e)(iv) (Adjustment for Illegality or Force Majeure Event).

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