From The Jolly Contrarian
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| ====Exercising a {{{{{1}}}|buy-in}}====
| | #redirect[[Gmsla deliverable and receivable securities capsule]] |
| Note that to determine the {{{{{1}}}|Default Market Value}} where a {{{{{1}}}|defaulting party}} is failing on a delivery of {{{{{1}}}|securities}} or {{{{{1}}}|collateral}} under a {{{{{1}}}|loan}} the {{{{{1}}}|non-defaulting party}} must '''sell''' (''not'' buy) securities equivalent to those it is expecting back from a {{{{{1}}}|Non-Defaulting Party}}. This, we think, is to ensure that the price is “real”: the temptation otherwise would be for the {{{{{1}}}|Non-Defaulting Party}} to accept any old bid or offer, safe in the knowledge it can pass the cost on to the {{{{{1}}}|Defaulting Party}}.
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| Tricks to watch out for, especially in illiquid stocks, is that the {{{{{1}}}|Non-Defaulting Party}} is not somehow influencing the price at which that innocent third party might transact (by agreeing to enter an offsetting transaction at the same time). That would be fraudulent, of course.
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Latest revision as of 10:27, 31 March 2022