Template:Csa IA Threshold MTA summ

Okay. Now in a CSA, beyond your basic Exposure and how much {{{{{1}}}|Credit Support}} you have already posted, there are three levers determining what you will have to post, or may call, in the future. These are:

1. {{{{{1}}}|Independent Amount}} or “{{{{{1}}}|IA}}”: How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice.
2. {{{{{1}}}|Threshold}}: Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin.
3. {{{{{1}}}|Minimum Transfer Amount}} or “{{{{{1}}}|MTA}}”: Assuming you are over your {{{{{1}}}|Threshold}}, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?

These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as initial margin: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to never post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd NFC in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for.