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Applicability - GMSLA Provision: Difference between revisions
Applicability - GMSLA Provision (view source)
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Therefore if counterparty goes insolvent during a trade, the first part of the transaction is fully settled and the administrator is left with a single forward settling transaction under which it is entitled to receive, DVP, an asset against payment of cash or delivery of an asset. | Therefore if counterparty goes insolvent during a trade, the first part of the transaction is fully settled and the administrator is left with a single forward settling transaction under which it is entitled to receive, DVP, an asset against payment of cash or delivery of an asset. | ||
The counterparty's exposure/liability is the net MTM of that forward settling trade: where it is a {{gmslaprov|Borrower}} its exposure is the haircut owed by the {{gmslaprov|Lender}} back to it. Where it is a {{gmslaprov|Lender}} the liability is the haircut you owe back the {{gmslaprov|Borrower}}. | The counterparty's exposure/liability is the net MTM of that forward settling trade: where it is a {{gmslaprov|Borrower}} its exposure is the [[haircut]] owed by the {{gmslaprov|Lender}} back to it. Where it is a {{gmslaprov|Lender}} the liability is the [[haircut]] you owe back the {{gmslaprov|Borrower}}. | ||
This is helpful to the netting analysis, which therefore applies only between one stock loan transaction and another (and not within a single stock loan trade). The absence of a netting flag means you cannot offset positive MTMs where you are a {{gmslaprov|Lender}} versus negative [[MTM]]s where you are a {{gmslaprov|Borrower}}. | This is helpful to the netting analysis, which therefore applies only between one stock loan transaction and another (and not within a single stock loan trade). The absence of a netting flag means you cannot offset positive MTMs where you are a {{gmslaprov|Lender}} versus negative [[MTM]]s where you are a {{gmslaprov|Borrower}}. | ||