Template:Csa Eligible Credit Support summ

What is, or is not, acceptable to post as credit support. In the olden days this was all a bit fraught, and accounted for much of the practical complication of the CSA as a document, and which (in the JC’s eyes, made it a sort of primordial smart contract, before there were such things as smart contracts.

The CSA governs a deterministic, but highly complicated flow of securities and currencies back and forth between counterparties daily, based on the {{{{{1}}}|Exposure}} of their portfolios. Who has to pay whom on any day, and what, is derivative — I know, right — of a load of extraneous factors besides that {{{{{1}}}|Exposure}} as a bare number: the “shape” of the derivatives book, the state of the market, the composition and market valuations of the {{{{{1}}}|Credit Support Balance}} already posted. Even a small firm will have multiple brokerage counterparties; a brokerage will have hundreds of thousands. There is simply no way of monitoring and accurately performing an arrangement as complicated as a Credit Support Annex manually. Only computers can do it. Hence, it is rather like a smart contract, and not just superficially, but practically: the “contract” as a meaningful thing is the operational reality, not the document. It lives in the configurations the parties operations teams punch into their respective collateral management applications.

If a number is mis-punched, or the application does not or cannot reflect what is stipulated on paper in the Credit Support Annex, no-one will ever know. At least, not until it is too late.

If your counterparty is a smoking ruin and you find out the {{{{{1}}}|Credit Support Balance}} you are holding comprises of illiquid pref shares listed on the Manila bourse, while the CSA prescribes G7 on-the-run government securities, then guess what.