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Threshold Amount

The Threshold Amount is usually defined as a cash amount or a percentage of shareholder funds, or both, in which case — schoolboy error hazard alert — be careful to say whether it is the greater or lesser of the two. It should be big: like, life-threateningly big — because the consequences of triggering a Cross Default are dire. Expect to see 2-3% of shareholder funds, or (for banks) sums in the order of hundreds of millions of dollars. For fund counterparties the number could be a lot lower — like, ten million dollars or so — and, of course, will key off NAV, not shareholder funds.