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Amwelladmin (talk | contribs) (→Margin) |
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These customised events tend to be more controversial, harder to articulate and more complicated: [[NAV trigger]]s may be set at different thresholds over different periods. | These customised events tend to be more controversial, harder to articulate and more complicated: [[NAV trigger]]s may be set at different thresholds over different periods. | ||
==== | ====[[Netting]] and [[margin]]==== | ||
There are less invasive credit mitigation techniques. | |||
*'''[[Netting]]''': Rights to offset positive and negative transaction values under the same agreement upon [[close out]]; | |||
*'''[[Margin]]''': The obligation: | |||
**'''[[Variation margin]]''': To regularly transfer cash or assets representing the present net [[mark-to-market]] value of transactions under the agreement; | |||
**'''[[Initial margin]]''': To transfer assets representing the worst-case market movements in transactions values between [[variation margin]] payments. | |||
So here’s the thing: As long as margin is regularly collected and paid when due, and as long as you’ve correctly calculated the initial margin you need so that it covers any “[[gap loss]]” if your counterparty goes bust — you’re covered. The moment the counterparty misses a margin call, you have a [[failure to pay]]. It’s the cleanest event there is. You may have to wait out a grace period of a day or two - but you took initial margin to look after that. |