Loss - 1992 ISDA Provision: Difference between revisions

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{{isda92anat|Loss}}
{{isda92anat|Loss}}
{{isdaprov|Loss}} is a means of valuing {{isdaprov|Transactions}} following their {{isdaprov|Early Termination}} under the {{1992isda}}. Spoddy point: unlike its alternative {{isdaprov|Market Quotation}}, “{{isdaprov|Loss}}” ''includes'' the “{{isdaprov|Unpaid Amount}}” concept in its definition:  
{{isda92prov|Loss}} is a means of valuing {{isda92prov|Transactions}} following their {{isda92prov|Early Termination}} under the {{1992isda}}. Spoddy point: unlike its alternative {{isda92prov|Market Quotation}}, “{{isda92prov|Loss}}” ''includes'' the “{{isda92prov|Unpaid Amount}}” concept in its definition:  
:''...{{isdaprov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant {{isdaprov|Early Termination Date}} and not made, except, so as to avoid duplication, if Section {{isdaprov|6(e)(i)}}(1) or (3) or {{isdaprov|6(e)(ii)}}(2)(A) applies...''
:''...{{isda92prov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant {{isda92prov|Early Termination Date}} and not made, except, so as to avoid duplication, if Section {{isda92prov|6(e)(i)}}(1) or (3) or {{isda92prov|6(e)(ii)}}(2)(A) applies...''


===Duplication? What duplication? Ohhhh — ''that'' duplication.===
===Duplication? What duplication? Ohhhh — ''that'' duplication.===
The “except, so as to avoid duplication” coda ''looks'' to be a magnificent piece of ISDA discombobulation, because at first blush there doesn’t seem any risk of duplication: the excluded paragraphs all deal exclusively with {{isdama}}s where  {{isdaprov|Market Quotation}}, and not {{isdaprov|Loss}}, applies. So this {{isdaprov|Loss}} definition seems entirely irrelevant ... until you notice that {{isdaprov|Settlement Amount}} used when valuing with Market Quotation defaults to {{isdaprov|Loss}}<ref>{{isdaprov|Loss}} ''not counting {{isdaprov|Unpaid Amounts}}'', that is — makes you weep doesn’t it?</ref> when, as most assuredly it will, {{isdaprov|Market Quotation}} turns out to be a totally impractical means of valuing a {{isdaprov|Terminated Transaction}}, since ''no-one will give you a price for a trade they can’t actually enter''.
The “except, so as to avoid duplication” coda ''looks'' to be a magnificent piece of ISDA discombobulation, because at first blush there doesn’t seem any risk of duplication: the excluded paragraphs all deal exclusively with {{isdama}}s where  {{isda92prov|Market Quotation}}, and not {{isda92prov|Loss}}, applies. So this {{isda92prov|Loss}} definition seems entirely irrelevant ... until you notice that {{isda92prov|Settlement Amount}} used when valuing with Market Quotation defaults to {{isda92prov|Loss}}<ref>{{isda92prov|Loss}} ''not counting {{isda92prov|Unpaid Amounts}}'', that is — makes you weep doesn’t it?</ref> when, as most assuredly it will, {{isda92prov|Market Quotation}} turns out to be a totally impractical means of valuing a {{isda92prov|Terminated Transaction}}, since ''no-one will give you a price for a trade they can’t actually enter''.


So it ''is'' a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that {{isdaprov|Market Quotation}} is waste of space anyway.
So it ''is'' a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that {{isda92prov|Market Quotation}} is waste of space anyway.


Whatever, it is simply magical that the ISDA drafting committee saw fit to treat {{isdaprov|Loss}}, but ''not'' {{isdaprov|Market Quotation}}, as being converted into a {{isdaprov|Termination Currency Equivalent}} and including {{isdaprov|Unpaid Amounts}}, especially as {{isdaprov|Loss}} is a fallback when {{isdaprov|Market Quotation}} fails to work, as inevitably it will.
Whatever, it is simply magical that the ISDA drafting committee saw fit to treat {{isda92prov|Loss}}, but ''not'' {{isda92prov|Market Quotation}}, as being converted into a {{isda92prov|Termination Currency Equivalent}} and including {{isda92prov|Unpaid Amounts}}, especially as {{isda92prov|Loss}} is a fallback when {{isda92prov|Market Quotation}} fails to work, as inevitably it will.


==={{isdaprov|Loss}} no more===
==={{isda92prov|Loss}} no more===
Under the {{2002isda}} it (and {{isdaprov|Market Quotation}}) was superseded by the better concept of the {{isdaprov|Close-out Amount}}.
Under the {{2002isda}} it (and {{isda92prov|Market Quotation}}) was superseded by the better concept of the {{isda92prov|Close-out Amount}}.


{{sa}}
{{sa}}
*{{isdaprov|Market Quotation}}
*{{isda92prov|Market Quotation}}
*{{isdaprov|Close-out Amount}}
*{{isda92prov|Close-out Amount}}
*{{isia}}
*{{isia}}

Revision as of 14:31, 13 March 2020

Template:Isda92anat Loss is a means of valuing Transactions following their Early Termination under the 1992 ISDA. Spoddy point: unlike its alternative Market Quotation, “Loss” includes the “Unpaid Amount” concept in its definition:

...Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies...

Duplication? What duplication? Ohhhh — that duplication.

The “except, so as to avoid duplication” coda looks to be a magnificent piece of ISDA discombobulation, because at first blush there doesn’t seem any risk of duplication: the excluded paragraphs all deal exclusively with ISDA Master Agreements where Market Quotation, and not Loss, applies. So this Loss definition seems entirely irrelevant ... until you notice that Settlement Amount used when valuing with Market Quotation defaults to Loss[1] when, as most assuredly it will, Market Quotation turns out to be a totally impractical means of valuing a Terminated Transaction, since no-one will give you a price for a trade they can’t actually enter.

So it is a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that Market Quotation is waste of space anyway.

Whatever, it is simply magical that the ISDA drafting committee saw fit to treat Loss, but not Market Quotation, as being converted into a Termination Currency Equivalent and including Unpaid Amounts, especially as Loss is a fallback when Market Quotation fails to work, as inevitably it will.

Loss no more

Under the 2002 ISDA it (and Market Quotation) was superseded by the better concept of the Close-out Amount.

See also

  1. ↑ Loss not counting Unpaid Amounts, that is — makes you weep doesn’t it?
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