1992 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
Market Quotation in a Nutshell™
|
The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here.
|
Original text
“Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.
|
Resources and Navigation
Index: Click ᐅ to expand:
|
|
Comparisons
Market Quotation and Loss were originated in the 1987 ISDA, were refined in the 1992 ISDA and then unceremoniously ditched as Transaction valuation concepts under the 2002 ISDA in favour of Close-out Amount, which is closer to Loss, but still a bit different.
Here is a comparison between the 1987 and 1992 versions of Market Quotation. Quite a lot of fiddling around, as you will see. But all in vain. Did it make much difference? At this remove, nearly forty years on, do we care?
Americans probably do.
Basics
If it weren’t so long ago, you would honestly say this ludicrous Market Quotation and Loss, and First Method and Second Method confection was designed with the sole purpose of keeping negotiators in tedious employment. It is all handled so much more deftly under the 2002 ISDA with the concept of Close-out Amount.
Premium content
Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics👇
- JC’s “nutshell” summary of the clause
- Background reading and long-form essays
-
- Pricing methodology
- What where, as there will be, there are fewer than three quotations
- MQ vs Exposure under the CSA
- Dealer polls and Lehman
|
See also
References