Daily Interest Compounding - CSA Provision

CSA Anatomy™ Go Premium “Interest Amount (VM)” means with respect to an Interest Period, the aggregate sum of the Base Currency Equivalents of the amounts of interest determined for each relevant currency and calculated for each day in that Interest Period on the portion of the Credit Support Balance (VM) comprised of cash in such currency, determined by the Valuation Agent for each such day as follows: (i) the amount of cash in such currency on that day plus, only if “Daily Interest Compounding” is specified as applicable in Paragraph 11(g)(iii), the aggregate of each Interest Amount (VM) determined for each preceding day, if any, in that Interest Period; multiplied by (ii) the relevant Interest Rate (VM) in effect for that day; divided by (iii) 360 (or, in the case of pounds sterling or any other currency specified as an “A/365 Currency” in Paragraph 11(g)(i), 365), provided that, unless “Negative Interest” is specified as applicable in Paragraph 11(g)(iii), if the Interest Amount (VM) for an Interest Period would be a negative amount, it will be deemed to be zero. (View Template) Resources Full wikitext | Nutshell wikitext English Law | 1 Interpretation | 2 Credit Support Obligations | 3 Transfers, Calculations and Exchanges | 4 Dispute Resolution | 5 Transfer of Title, No Security Interest, Distributions and Interest Amount | 6 Default | 7 Representation | 8 Expenses | 9 Miscellaneous | 10 Definitions | 11 Elections and Variables · Base Currency and Eligible Currency · Credit Support Obligations · Valuation and Timing · Exchange Date · Dispute Resolution · Distributions and Interest Amount · Addresses for Transfers · Credit Support Offsets · Other CSA 2018 ISDA Credit Support Deed for Initial Margin Index: Click ᐅ to expand: CSA Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

An election in Paragraph 11(g)(ii) which affects the definition of Interest Amount (VM) (see definition in the box).

This in turn folds back to the Interest Payment (VM) provision, under which one can (by making the election in Paragraph 11(g)(ii)), decide whether you want Interest Adjustment or Interest Transfer.

If you want Interest Transfer One might query whether “Daily Interest Compounding” should apply.

Interest compounds anyway at the end of each specified interest period (because it is paid out or added to the Credit Support Balance (VM), depending on which election you made at 11(g)(ii). If that period is “daily” then there's nothing really to be gained by Daily Interest Compounding. If the Interest Period is longer than that, there may be — but in the present environment (which, as those of you who lived through the Weimar Republic may recall, CAN MOST DEFINITELY CHANGE) — the thought of daily compounding 1/365th of the bugger all interest you're getting paid anywaymight seem like a fight it’s not worth dying in a ditch about.

See also

• Interest Amount (VM)
• Interest Payment (VM)
• Interest Adjustment (paragraph 5(c)(ii)(A))
• Interest Transfer (paragraph 5(c)(ii)(B))
• Daily Interest Compounding
• 11(g)(ii)