Credit Support Document - ISDA Provision: Difference between revisions

Credit Support Document - ISDA Provision (view source)

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 Being the document by which {{isdaprov|Credit Support}} is provided by a {{isdaprov|Credit Support Provider}}.
 ===The {{csa}} is ''not'' a Credit Support Document===
-Note that a {{tag|CSA}} is '''not''' a {{isdaprov|Credit Support Document}}, and you should not list it as one in Part 4 of the Schedule, however tempting it might be. I mean it sounds like one, right? But no: the counterparty cannot be its own {{isdaprov|Credit Support Provider}}. The {{csa}} is, rather, a {{isdaprov|Transaction}} under the {{isdama}}. This is rather important to the whole issue of [[close-out netting]]. Deep [[ISDA lore]].
+Note that a {{tag|CSA}} is '''not''' a {{isdaprov|Credit Support Document}}, and you should not list it as one in {{isdaprov|Part 4}} of the {{isdaprov|Schedule}}, however satisfying it might be to do so. I mean it sounds like one, right? But no: the counterparty cannot be its own {{isdaprov|Credit Support Provider}}. The {{csa}} is, rather, a {{isdaprov|Transaction}} under the {{isdama}}. This is rather important to the whole issue of [[close-out netting]]. Deep [[ISDA lore]].
 ===[[Guarantees]] under the {{isdama}}: why {{isdaprov|Transaction}}-specific {{isdaprov|guarantee}}s don't work===
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 On a close-out, each {{isdaprov|Transaction}} is terminated, the individual close-out amounts are determined, they’re aggregated up to a single net sum (i.e. negative exposures are netted off against positive ones) and a single {{isdaprov|Close Out Amount}} is payable with respect to ''all terminated {{isdaprov|Transactions}}'' under {{isdaprov|6(e)}} ({{isdaprov|Payments on Early Termination}}) of the {{isdama}}.<ref>The {{isdama}} itself is never actually terminated, but carries impotently on in undead twilight, roaming the badlands like [[Nosferatu]] or the [[Flying Dutchman]], unloved, unredeemed, until the [[end of days]].</ref>
-*That is to say, it is *not* payable under the {{isdaprov|Transaction}} at all - it's payable under the {{isdama}} itself.
+*That is to say, it is *not* payable under the {{isdaprov|Transaction}} at all - it’s payable under the {{isdama}} itself.
+*Therefore, if the [[guarantee]] relates to the single {{isdaprov|Transaction}}, at the point you wish to rely on it (i.e., upon the party’s default), the Transaction has gone, with no payment required. Vanished, like tears in the rain.
-*Therefore, if the guarantee relates to the single {{isdaprov|Transaction}} only, at precisely the point you wish to rely on it (i.e., upon the party’s default), it will vanish. Same goes for [[letters of credit]].
 {{ref}}