Template:Csa credit support amount calculation

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Calculating your Credit Support Amount

How the IA contributes to the Credit support Amount — being the amount one actually has to hand over of a Valuation Date can be mind-boggling. It pans out like for a given counterparty like so:

  • First, take your Exposure - the net mark-to-market value of your Transactions under the ISDA not counting, of course, the CSA itself. Call this E.
  • Next, add to E the total Independent Amount you are required to pay the other feller. Call this IAt. E + IAt is the total amount you have to hand over as Credit Support if it weren't for ...
  • Any Independent Amount the other dude owes you. This we will call IAr. There’s something faintly absurd both parties exchanging Independent Amounts by title transfer — they net off against each other — but that’s as may be. Stupider things have happened[1].
  • Any Threshold that applies to the Transferor - being the minimum MTM amount at which it must pony up variation margin in the first place.

This leaves you with a formula as follows:

Max[0, E + IAt - (IAr + Threshold.)

Let's plug in some numbers. Say:

  • Exposure is 10,000,000
  • The IAt you owe him: 2,000,000
  • IAr he owes you: 0
  • Your Threshold: 5,000,000
  1. SFTR disclosure, for example.