|The Jolly Contrarian’s Glossary |
The snippy guide to financial services lingo.™
As its name suggests, a calculation agent is a person appointed to calculate things, usually in the context of a master trading agreement like an ISDA Master Agreement, a Global Master Repurchase Agreement, a Global Master Securities Lending Agreement or a 1995 English Law CSA or other credit support document. It will usually be one of the parties to the master agreement, and usually the broker dealer out of the two, if there is only one.
But just who the calculation agent is, and how much discretion it has to determine the calculation without entertaining protest from the other party, is a matter that can occupy a derivatives lawyer for days on end.
Spoiler: appointing each party as a co-calculation agent won’t work.
There’s an old saying:
However superficially neat this might seem to the age-old valuation dilemma of who should price the trade, it suffers in one important respect: unless the parties agree on the determination, the parties — er — won't agree on the determination. And then what do you do?
More discussion at:
- Calculation Agent (ISDA Master Agreement)
- Calculation Agent (1995 English Law CSA)
- Calculation Agent (Global Master Repurchase Agreement)
- Calculation Agent (Global Master Securities Lending Agreement)
- Calculation Agent (2002 ISDA Equity Derivatives Definitions)
- Like, always.