Termination Currency - ISDA Provision
2002 ISDA Master Agreement
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Crosscheck: Termination Currency in a Nutshell™
Original text
See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.
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Comparisons
What currency do you settle up in, when all has gone tetas arriba.
Basics
Compare and contrast with the Base Currency in the CSA. Ideally, you’d want them to be the same. Ten points for style if you can think of a reason for having different ones. Goldman probably could.
So what is this all about, then? Well, swap transactions by nature are likely to have different currencies — cross-currency swaps are, anyway — and if (heaven forfend) you should be closing out a whole portfolio of them, then you will have boil everything down, at some point, to a single currency. Some are better than others — a G7 ones are more liquid and less volatile than others, and each counterparty will have a preference for its own home currency — an investment fund, the base currency of the fund.
The sort of thing you might expect to see specified in the schedule is this:
- “Termination Currency” means one of the currencies in which payments are required to be made under a Terminated Transaction selected by the Non-defaulting Party or the non-Affected Party, as the case may be, or where there are two Affected Parties, as agreed between them or, if not agreed, or if the selected currency so is not freely available, [U.S. Dollars][Euro][Pounds Sterling].
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See also
References
Overview
Summary
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- The JC’s famous Nutshell™ summary of this clause
- SNAFU in the 1992 ISDA. No fallback!