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Absolute value: Difference between revisions
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Amwelladmin (talk | contribs) (Created page with "{{g}}In maths, the absolute value of a number is its positive value, whether the number itself is positive or negative. So the absolute value of +10 is +10, but the ab...") |
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What possible use is the [[absolute value]]? Well, it is quite handy when talking about payments in a derivative contract which, if positive, are payable from A to B and, if negative, are payable from B to A. In such a case we can say “the party in question will pay the ''[[absolute value]]'' of the payment”. | What possible use is the [[absolute value]]? Well, it is quite handy when talking about payments in a derivative contract which, if positive, are payable from A to B and, if negative, are payable from B to A. In such a case we can say “the party in question will pay the ''[[absolute value]]'' of the payment”. | ||
For example if, carelessly, | For example if, carelessly, you said: ''The {{isdaprov|Calculation Agent}} will calculate an adjustment payment which, if positive, {{isdaprov|Party A}} must pay to {{isdaprov|Party B}} and, if negative, {{isdaprov|Party B}} will pay to {{isdaprov|Party A}}.'' | ||
Here you would be saying that Party B has to pay a ''negative'' amount — but paying a negative amount is the same as receiving a positive amount. That’s not the idea. So in the formulation above, Party A would wind up paying Party B in every situation, whether the amount was positive or negative. This is not what is intended. You can fix it thus: ''The {{isdaprov|Calculation Agent}} will calculate an adjustment payment which, if positive, {{isdaprov|Party A}} must pay to {{isdaprov|Party B}} and, if negative, {{isdaprov|Party B}} will pay the [[absolute value]] of that amount to {{isdaprov|Party A}}.'' | |||
Also can come in handy with unexpected things like negative interest rates. | Also can come in handy with unexpected things like negative interest rates. | ||