Buyer and Seller - Credit Derivatives Provision

2014 ISDA Credit Derivatives Definitions A Jolly Contrarian owner’s manual™ Resources and navigation Resources (full wikitext) | (nutshell wikitext) | Anatomy | Narrowly-tailored credit event | Equity v credit derivatives showdown Index: Click ᐅ to expand: Credit Derivatives Section Buyer and Seller in a Nutshell™ Use at your own risk, campers! Section 1.3. “Buyer” is the Fixed Rate Payer; that is, the one who benefits from credit protection. Section 1.4. “Seller” is the Floating Rate Payer; that is, the one who provides the credit protection. Section 12.6. “Fixed Rate Payer” will be specified in the Confirmation. Section 12.16. “Floating Rate Payer” will be specified in the Confirmation. view template Full text of Section Buyer and Seller Section 1.3 Buyer. “Buyer” means the Fixed Rate Payer. Section 1.4 Seller. “Seller” means the Floating Rate Payer. Section 12.6 Fixed Rate Payer. “Fixed Rate Payer” means, in respect of a Credit Derivative Transaction, the party specified as such in the related Confirmation. Section 12.16 Floating Rate Payer. “Floating Rate Payer” means, in respect of a Credit Derivative Transaction, the party specified as such in the related Confirmation. view template Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

Content and comparisons

There is a Buyer and Seller in the 2002 ISDA Equity Derivatives Definitions too, for Option Transactions which include, of course Puts and Calls.

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Summary

Buyer

It is deliciously elliptical, and classic carry-on from ISDA’s crack drafting squad™ to define a term in a way that is not only itself an embedded definition, but also one that categorically tells you less about the term than the original definier.

“Buyer” is a useful label in itself. It doesn’t really need defining. We surmise that this “Buyer” must be the person buying credit protection. Right? And so it is.

Now it is also true that the Buyer also happens to be the Fixed Rate Payer, in that it pays a pre-agreed, fixed premium — sorry, sorry, “Fixed Amount” — for the credit protection it buys — but that takes us one step further removed from what is going on. We will need to travel as far as Section 12.6 of the 2014 ISDA Credit Derivatives Definitions to find out what the “Fixed Rate Payer” even means. Don’t hold your breath: it is simply the party specified as such in the Confirmation.

Seller

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General discussion

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See also

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