Guarantee: Difference between revisions

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(Replaced content with "==Components of a guarantee== ===See Also=== *{{isdaprov|Credit Support Document}} *Guarantees of the ISDA")
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==Guarantees under the {{isdama}} and why a Transaction-Specific guarantee is a bad idea==
==Components of a guarantee==
Should a client request a transaction-specific parental guarantee under an {{isdama}} instead of the usual “all obligations” guarantee of all obligations under the {{isdama}} and all transactions under it, escalate immediately.


We should *never* agree to the guarantee of individual {{isdaprov|Transaction}}s (or accepting [[letter of credit|Letters of Credit]] with respect to individual transactions) under an {{isdama}}. The reason relates to the way {{isdama}}s are closed out inder Section {{isdaprov|6(e)}}:
===See Also===
 
*{{isdaprov|Credit Support Document}}
{{box|{{isdaq|6(e)(i)|2002}}}}
*[[Guarantees of the ISDA]]
 
*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 the single Early Termination Payment is payable under {{isdaprov|6(e)}} ({{isdaprov|Payments on Early Termination}}) of the {{isdama}}.
 
*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}} 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.
 
{{isdaanatomy}}

Revision as of 09:31, 23 December 2015

Components of a guarantee

See Also

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