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Amwelladmin (talk | contribs) (Created page with "The controversial protections in master trading agreements are there for one reason: To stop you losing money. They’re “''credit mitigants''”: ====...") |
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The controversial protections in master trading agreements are there for one reason: To stop you losing money. They’re “''[[credit mitigant|credit mitigants]]''”: | The controversial protections in master trading agreements are there for one reason: To stop you losing money. They’re “''[[credit mitigant|credit mitigants]]''”: | ||
====[[Event of default|Events of default]]==== | ====[[Event of default|Events of default]]==== | ||
*If a party [[failure to pay|fails to pay]] or deliver things it owes under the agreement | *'''Direct [[Failure to pay]]''': If a party [[failure to pay|fails to pay]] or deliver things it owes under the agreement | ||
*Things that increase the likelihood that the party will be unable to do so in the future: | *'''Indirect credit issues''': Things that increase the likelihood that the party will be unable to do so in the future: | ||
**The party goes [[insolvent]] (or gets close to it) | **'''[[Bankruptcy]]''': The party goes [[insolvent]] (or gets close to it) | ||
**The party’s credit | **'''Credit impairment''': The party’s [[credit rating]]s are prejudiced (via a merger) | ||
**The party | **'''[[Cross default]]''': The party breaches important obligations owed to other counterparties | ||
*Things that undermine the comfort you took as to the party’s creditworthiness | *'''[[Misrepresentation]]''': Things that tend to undermine the comfort you took as to the party’s creditworthiness at the outset of the arrangement, such as representations and warranties no longer being true. | ||
*'''[[Credit support provider]] issues''': similar things happening to the counterparty’s named guarantors or [[credit support provider]]s. | |||
* | These [[events of default]] live in the pre-printed the agreement, and tend not to be negotiated (except perhaps [[cross-default]], and that's a whole different story). | ||
====[[Additional termination events]]==== | |||
We also throw in customised “[[additional termination event|additional termination events]]” tailored to the idiosyncrasies of each counterparty. For example, for [[hedge fund]]s we may require “key person” events allowing termination if named individuals cease to be associated with the fund; [[NAV trigger]]s granting close-out rights related to significant decreases in the [[net asset value]] of the fund. | |||
These customised events tend to be more controversial and more complicated: [[NAV trigger]]s may be set at different thresholds over different periods | |||
====Margin==== | |||
Master trading agreements also have less invasive means of mitigating | |||