Loss - 1992 ISDA Provision: Difference between revisions

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Loss - 1992 ISDA Provision (view source)

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{{isda92anat|Loss}}
{{isda92manual|Loss}}
{{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 {{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.===
The “except, so as to avoid duplication” coda ''looks'' to be a magnificent piece of ISDA discombobulation, because at first blush there doesn’t seem any risk of duplication: the excluded paragraphs all deal exclusively with {{isdama}}s where  {{isdaprov|Market Quotation}}, and not {{isdaprov|Loss}}, applies. So this {{isdaprov|Loss}} definition seems entirely irrelevant ... until you notice that {{isdaprov|Settlement Amount}} used when valuing with Market Quotation defaults to {{isdaprov|Loss}}<ref>{{isdaprov|Loss}} ''not counting {{isdaprov|Unpaid Amounts}}'', that is — makes you weep doesn’t it?</ref> 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''.
 
So it ''is'' a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that {{isdaprov|Market Quotation}} is waste of space anyway.
 
Whatever, it is simply magical that the ISDA drafting committee saw fit to treat {{isdaprov|Loss}}, but ''not'' {{isdaprov|Market Quotation}}, as being converted into a {{isdaprov|Termination Currency Equivalent}} and including {{isdaprov|Unpaid Amounts}}, especially as {{isdaprov|Loss}} is a fallback when {{isdaprov|Market Quotation}} fails to work, as inevitably it will.
 
==={{isdaprov|Loss}} no more===
Under the {{2002isda}} it (and {{isdaprov|Market Quotation}}) was superseded by the better concept of the {{isdaprov|Close-out Amount}}.
 
{{sa}}
*{{isdaprov|Market Quotation}}
*{{isdaprov|Close-out Amount}}
*{{isia}}
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