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Flawed asset: Difference between revisions
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You'll be most likely wanting to see the discussion on this wonderfully baffling subject under Section {{isdaprov|2(a)(iii)}} of the {{isdama}}. | You'll be most likely wanting to see the discussion on this wonderfully baffling subject under Section {{isdaprov|2(a)(iii)}} of the {{isdama}}. | ||
More generally, following an [[event of default]], a flawed asset provision allows an innocent, but [[out-of-the-money]] party to a derivative or securities finance transaction to suspend performance of its obligations without terminating the transaction and thereby crystallising a mark-to-market loss. Section {{isdaprov|2(a)(iii)}} entered the argot in a simpler, more peaceable time, when zero threshold, daily margined {{tag|CSA}}s were an uncommon, rather fantastical sight. They're more or less obligatory now, so it's hard to see the justification for a flawed asset provision. | More generally, following an [[event of default]], a [[flawed asset]] provision allows an innocent, but [[out-of-the-money]] party to a derivative or securities finance transaction to suspend performance of its obligations without terminating the transaction and thereby crystallising a mark-to-market loss. | ||
The asset - a right to payment under the transaction - is "flawed" in the sense that it only become payables if the conditions precedent are fulfilled. | |||
Section {{isdaprov|2(a)(iii)}} entered the argot in a simpler, more peaceable time, when zero threshold, daily margined {{tag|CSA}}s were an uncommon, rather fantastical sight. They're more or less obligatory now, so it's hard to see the justification for a flawed asset provision. | |||
===Master trading agreements=== | ===Master trading agreements=== | ||