Template:M comp disc Credit Derivatives 4: Difference between revisions
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[[4.1 - Credit Derivatives Provision|The]] compare and contrast here is to the {{isdama}}. | [[4.1 - Credit Derivatives Provision|The]] compare and contrast here is to the {{isdama}}. Many reflect the fact that the ISDA, being a private transaction creating inherently volatile exposures, has hair-trigger termination rights that you would not expect in a long term senior debt financing arrangement. | ||
{{Tabletopflex}} | {{Tabletopflex}} | ||
|+ Comparison between 2002 Events of Default and 2014 Credit Events | |+ Comparison between 2002 {{isdaprov|Events of Default}} and 2014 {{cddprov|Credit Events}} | ||
{{aligntop}} | {{aligntop}} | ||
! {{isdama}} !! {{cdd}} !! Commentary | ! {{isdama}} !! {{cdd}} !! Commentary | ||
{{aligntop}} | {{aligntop}} | ||
| {{isdaprov|5(a)(i)}} {{isdaprov|Failure to Pay or Deliver}} || {{cddprov|4.5}} {{cddprov|Failure to Pay}} || | | {{isdaprov|5(a)(i)}} {{isdaprov|Failure to Pay or Deliver}} || {{cddprov|4.5}} {{cddprov|Failure to Pay}} || Note the {{cddprov|Payment Requirement}} threshold in the {{cdd}}. This is to ensure the derivative only catpures existential defaults and not merely irritating ones. | ||
{{aligntop}} | {{aligntop}} | ||
| {{isdaprov|5(a)(ii)}} {{isdaprov|Breach of Agreement}} || The “Repudiation” bit of {{cddprov|4.6}} {{cddprov|Repudiation/Moratorium}} || | | {{isdaprov|5(a)(ii)}} {{isdaprov|Breach of Agreement}} || The “Repudiation” bit of {{cddprov|4.6}} {{cddprov|Repudiation/Moratorium}} || | ||
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| {{isdaprov|5(a)(iii)}} {{isdaprov|Credit Support Default}} || No equivalent || The point is to vouchsafe the creditworthiness of the specific {{cddprov|Reference Entity}}, not any old affiliate who might have guaranteed its obligations. If you want that, specify the affiliate guarantor as the {{cddprov|Reference Entity}}, and ensure that {{cddprov|Qualifying Guarantee}}s count. | | {{isdaprov|5(a)(iii)}} {{isdaprov|Credit Support Default}} || No equivalent || The point is to vouchsafe the creditworthiness of the specific {{cddprov|Reference Entity}}, not any old affiliate who might have guaranteed its obligations. If you want that, specify the affiliate guarantor as the {{cddprov|Reference Entity}}, and ensure that {{cddprov|Qualifying Guarantee}}s count. | ||
{{aligntop}} | {{aligntop}} | ||
| {{isdaprov|5(a)(iv)}} {{isdaprov|Misrepresentation}} || NA || | | {{isdaprov|5(a)(iv)}} {{isdaprov|Misrepresentation}} || NA || Misrepresentation is a bilasteral sort of a thing, and does not necessarily indicate complete collapse, and where it does, will be accompanied by more hard-edged events (like catastrophic Failures to Pay and Bankruptcy), so need not be separately mentioned. | ||
{{aligntop}} | {{aligntop}} | ||
| {{isdaprov|5(a)(v)}} {{isdaprov|Default Under Specified Transaction}} || {{cddprov|4.3}} {{cddprov|Obligation Acceleration}} || | | {{isdaprov|5(a)(v)}} {{isdaprov|Default Under Specified Transaction}} || {{cddprov|4.3}} {{cddprov|Obligation Acceleration}} || | ||
Revision as of 09:10, 25 April 2023
The compare and contrast here is to the ISDA Master Agreement. Many reflect the fact that the ISDA, being a private transaction creating inherently volatile exposures, has hair-trigger termination rights that you would not expect in a long term senior debt financing arrangement.
| ISDA Master Agreement | 2014 ISDA Credit Derivatives Definitions | Commentary |
|---|---|---|
| 5(a)(i) Failure to Pay or Deliver | 4.5 Failure to Pay | Note the Payment Requirement threshold in the 2014 ISDA Credit Derivatives Definitions. This is to ensure the derivative only catpures existential defaults and not merely irritating ones. |
| 5(a)(ii) Breach of Agreement | The “Repudiation” bit of 4.6 Repudiation/Moratorium | |
| 5(a)(iii) Credit Support Default | No equivalent | The point is to vouchsafe the creditworthiness of the specific Reference Entity, not any old affiliate who might have guaranteed its obligations. If you want that, specify the affiliate guarantor as the Reference Entity, and ensure that Qualifying Guarantees count. |
| 5(a)(iv) Misrepresentation | NA | Misrepresentation is a bilasteral sort of a thing, and does not necessarily indicate complete collapse, and where it does, will be accompanied by more hard-edged events (like catastrophic Failures to Pay and Bankruptcy), so need not be separately mentioned. |
| 5(a)(v) Default Under Specified Transaction | 4.3 Obligation Acceleration | |
| 5(a)(vi) Cross Default | 4.4 Obligation Default (but see also 4.5 Failure to Pay) | |
| 5(a)(vii) Bankruptcy | 4.2 Bankruptcy and 4.8 Governmental Intervention | The 2014 ISDA Credit Derivatives Definitions splits out the governmental intervention section of the ISDA’s Bankruptcy section (Section 5(a)(vii)(4)(ii)) into a separate section. Otherwise, broadly the same. |
| 5(a)(viii) Merger without Assumption | No equivalent | |
| No equivalent | 4.7 Restructuring |