Loss - 1992 ISDA Provision: Difference between revisions
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{{isda92anat|Loss}} | {{isda92anat|Loss}} | ||
{{isdaprov|Loss}} is a means of valuing {{isdaprov|Transactions}} following their {{isdaprov|Early Termination}} under the {{1992isda}}. Spoddy point: | {{isdaprov|Loss}} is a means of valuing {{isdaprov|Transactions}} following their {{isdaprov|Early Termination}} under the {{1992isda}}. Spoddy point: unlike its alternative {{isdaprov|Market Quotation}}, “{{isdaprov|Loss}}” ''includes'' the “{{isdaprov|Unpaid Amount}}” concept in its definition: | ||
:''{{isdaprov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, | :''...{{isdaprov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant {{isdaprov|Early Termination Date}} and not made, except, so as to avoid duplication, if Section {{isdaprov|6(e)(i)}}(1) or (3) or {{isdaprov|6(e)(ii)}}(2)(A) applies...'' | ||
===Duplication? What duplication? Ohhhh — ''that'' duplication.=== | |||
There ''looks'' to be a magnificent piece of ISDA discombobulation here: Section {{isdaprov|6(e)(i)}}(1) and (3), and {{isdaprov|6(e)(ii)}}(2)(A), all deal exclusively with ISDA master agreements where the parties have agreed {{isdaprov|Market Quotation}}, and not {{isdaprov|Loss}}, applies. So there is, in fact, ''no'' risk of duplication, since the definition of {{isdaprov|Loss}} is entirely irrelevant to these parts of the agreement. ... until you look at the definition of {{isdaprov|Settlement Amount}}, which defaults to {{isdaprov|Loss}} (note: but ''not counting {{isdaprov|Unpaid Amounts}}'' — it makes you weep doesn’t it) when, as most assuredly it will, {{isdaprov|Market Quotation}} turns out to be a totally impractical means of valuing a {{isdaprov|Terminated Transaction}}, since ''no-one will give you a price for a trade they can’t actually enter''. | There ''looks'' to be a magnificent piece of ISDA discombobulation here: Section {{isdaprov|6(e)(i)}}(1) and (3), and {{isdaprov|6(e)(ii)}}(2)(A), all deal exclusively with ISDA master agreements where the parties have agreed {{isdaprov|Market Quotation}}, and not {{isdaprov|Loss}}, applies. So there is, in fact, ''no'' risk of duplication, since the definition of {{isdaprov|Loss}} is entirely irrelevant to these parts of the agreement. ... until you look at the definition of {{isdaprov|Settlement Amount}}, which defaults to {{isdaprov|Loss}} (note: but ''not counting {{isdaprov|Unpaid Amounts}}'' — it makes you weep doesn’t it) when, as most assuredly it will, {{isdaprov|Market Quotation}} turns out to be a totally impractical means of valuing a {{isdaprov|Terminated Transaction}}, since ''no-one will give you a price for a trade they can’t actually enter''. | ||
Revision as of 13:16, 31 July 2019
Template:Isda92anat Loss is a means of valuing Transactions following their Early Termination under the 1992 ISDA. Spoddy point: unlike its alternative Market Quotation, “Loss” includes the “Unpaid Amount” concept in its definition:
- ...Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies...
Duplication? What duplication? Ohhhh — that duplication.
There looks to be a magnificent piece of ISDA discombobulation here: Section 6(e)(i)(1) and (3), and 6(e)(ii)(2)(A), all deal exclusively with ISDA master agreements where the parties have agreed Market Quotation, and not Loss, applies. So there is, in fact, no risk of duplication, since the definition of Loss is entirely irrelevant to these parts of the agreement. ... until you look at the definition of Settlement Amount, which defaults to Loss (note: but not counting Unpaid Amounts — it makes you weep doesn’t it) when, as most assuredly it will, Market Quotation turns out to be a totally impractical means of valuing a Terminated Transaction, since no-one will give you a price for a trade they can’t actually enter.
Whatever, it is simply magical that the ISDA drafting committee saw fit to treat Loss, but not Market Quotation, as being converted into a Termination Currency Equivalent and including Unpaid Amounts, especially as Loss is a fallback when Market Quotation fails to work, as inevitably it will.
Loss no more
Under the 2002 ISDA it (and Market Quotation) was superseded by the better concept of the Close-out Amount.