Market Quotation - 1992 ISDA Provision
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See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.
If it weren’t so long ago, you would honestly say this ludicrous Market Quotation and Loss, and First Method and Second Method confection was designed with the sole purpose of keeping negotiators in tedious employment.
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- Pricing methodology: Note that this quote comprises a portfolio of transactions on identical economic terms (including collateralisation), but between the Non-affected Party and the relevant market maker; i.e. you don't take into account the (almost inevitable) deterioration of the creditworthiness of the Affected Party.
- Where there are fewer than three quotations: By dint of the definition of Settlement Amount, if there are fewer that three quotations, or the determining party thinks the value provided by Market Quotation is commercially unrealistic, Market Quotation defaults to Loss.
- Will there ever be any quotations?: No, which is why you need to note that the definition of Settlement Amount defaults to Loss when, as surely they will, every Reference Market-maker respectfully declines to take your call.
Relationship to Exposure under the 1995 CSA
Eagle-eyed observers will note that Market Quotation gets a name-check in the definition of Exposure in the 1995 CSA. So how does that work, you might ask, where you have a 2002 ISDA which doesn't have a definition of Market Quotation? Well, the answer lies in the 2002 ISDA Master Agreement Protocol. As long as your counterparty has adopted that, then the provisions are converted over to 2002-speak as it were.