Calculation agent

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As its name suggests, a calculation agent is a person appointed to calculate things, usually in the context of a master trading agreement like an ISDA Master Agreement, a Global Master Repurchase Agreement, a 2010 GMSLA or a 1995 CSA or other credit support document. It will usually be one of the parties to the master agreement, and usually the broker dealer out of the two, if there is only one.

But just who the calculation agent is, and how much discretion it has to determine the calculation without entertaining protest from the other party, is a matter that can occupy a derivatives lawyer for days on end.

Spoiler: appointing each party as a co-calculation agent won’t work.

There’s an old saying:

A co-calculation agent is no calculation agent.

However superficially neat this might seem to the age-old valuation dilemma of who should price the trade, it suffers in one important respect: unless the parties agree on the determination, the parties — er — won't agree on the determination. And then what do you do?

See also

• Valuation