Template:M summ Credit Derivatives 4.9: Difference between revisions
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[[4.9 - Credit Derivatives Provision|Workaday]] definitions needed for the Credit Events section to work properly. Since the point of the {{cdd}} is to trigger catastrophic, {{cddprov|Bankruptcy}} type events — but arguably trigger them “promptly” as soon as anything looking like it might make a goner of the {{cddprov|Reference Entity}} happens — so you have {{cddprov|Payment Requirement}} (the size of a due payment for a {{cddprov|Failure to Pay}} — set by default at USD1m) and {{cddprov|Default Requirement}}, being the total notional size of obligation you have defaulted on, where the actual failure may be less than the {{cddprov|Failure to Pay}} threshold (and may not be a payment failure at all) — that defaults to USD10m. | [[4.9 - Credit Derivatives Provision|Workaday]] definitions needed for the Credit Events section to work properly. Since the point of the {{c|Embedded Template}}{{cdd}} is to trigger catastrophic, {{c|Embedded Template}}{{cddprov|Bankruptcy}} type events — but arguably trigger them “promptly” as soon as anything looking like it might make a goner of the {{c|Embedded Template}}{{cddprov|Reference Entity}} happens — so you have {{c|Embedded Template}}{{cddprov|Payment Requirement}} (the size of a due payment for a {{c|Embedded Template}}{{cddprov|Failure to Pay}} — set by default at USD1m) and {{c|Embedded Template}}{{cddprov|Default Requirement}}, being the total notional size of obligation you have defaulted on, where the actual failure may be less than the {{c|Embedded Template}}{{cddprov|Failure to Pay}} threshold (and may not be a payment failure at all) — that defaults to USD10m. | ||
Both feel kind of ''light'' to us in these modern days where you can be fined ten times that just for not managing your custody records properly, but here we are. You just have to remember to set the thresholds higher. | Both feel kind of ''light'' to us in these modern days where you can be fined ten times that just for not managing your custody records properly, but here we are. You just have to remember to set the thresholds higher. | ||
Revision as of 08:30, 20 May 2023
Workaday definitions needed for the Credit Events section to work properly. Since the point of the 2014 ISDA Credit Derivatives Definitions is to trigger catastrophic, Bankruptcy type events — but arguably trigger them “promptly” as soon as anything looking like it might make a goner of the Reference Entity happens — so you have Payment Requirement (the size of a due payment for a Failure to Pay — set by default at USD1m) and Default Requirement, being the total notional size of obligation you have defaulted on, where the actual failure may be less than the Failure to Pay threshold (and may not be a payment failure at all) — that defaults to USD10m.
Both feel kind of light to us in these modern days where you can be fined ten times that just for not managing your custody records properly, but here we are. You just have to remember to set the thresholds higher.