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Template:Csa distributions capsule: Difference between revisions
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Template:Csa distributions capsule (view source)
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How would that happen? [[All other things being equal|All other things staying equal]], it couldn’t: if the {{{{{1}}}prov|Transferee}}’s {{{{{1}}}prov|Exposure}} and the {{{{{1}}}prov|Value}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}} stayed the same as it was when [[variation margin]] was last called, the arrival of income on any part of that {{{{{1}}}prov|Credit Support Balance}} ought to be spirited back to the {{{{{1}}}prov|Transferor}}: as long as the {{{{{1}}}prov|Transferee}} was still holding it, the {{{{{1}}}prov|Transferee}} otherwise would become indebted for the value of that income to the {{{{{1}}}prov|Transferor}}. | How would that happen? [[All other things being equal|All other things staying equal]], it couldn’t: if the {{{{{1}}}prov|Transferee}}’s {{{{{1}}}prov|Exposure}} and the {{{{{1}}}prov|Value}} of the {{{{{1}}}prov|Transferor}}’s {{{{{1}}}prov|Credit Support Balance}} stayed the same as it was when [[variation margin]] was last called, the arrival of income on any part of that {{{{{1}}}prov|Credit Support Balance}} ought to be spirited back to the {{{{{1}}}prov|Transferor}}: as long as the {{{{{1}}}prov|Transferee}} was still holding it, the {{{{{1}}}prov|Transferee}} otherwise would become indebted for the value of that income to the {{{{{1}}}prov|Transferor}}. | ||
But as we know, {{{{{1}}}prov|Exposure}}s ''don’t'' just quietly sit there. If they did, there wouldn’t be any need for initial margin, and collecting even variation margin would be less fraught. So if the {{{{{1}}}prov|Transferee}}’s {{{{{1}}}prov|Exposure}} has increased, the arrival of that income might serve to fill a hole in the existing coverage, in which case, why pay it away only to ask for it back again? Similarly, the value of a pending but as-yet-unpaid income payment will be priced into the value of the [[securities]] generating it.<ref>It will trade | But as we know, {{{{{1}}}prov|Exposure}}s ''don’t'' just quietly sit there. If they did, there wouldn’t be any need for initial margin, and collecting even variation margin would be less fraught. So if the {{{{{1}}}prov|Transferee}}’s {{{{{1}}}prov|Exposure}} has increased, the arrival of that income might serve to fill a hole in the existing coverage, in which case, why pay it away only to ask for it back again? Similarly, the value of a pending but as-yet-unpaid income payment will be priced into the value of the [[securities]] generating it.<ref>It will trade “[[dirty price|dirty]]” until the distribution is paid, at which point it will trade clean.</ref> So even if the {{{{{1}}}prov|Exposure}} ''hasn’t'' changed in the mean time, the arrival of a [[coupon]] or [[dividend]] will reduce the {{{{{1}}}prov|Value}} of those [[securities]] on which it was paid, so — [[all other things being equal]] — the {{{{{1}}}prov|Transferee}} might expect to hang onto the {{{{{1}}}prov|Distribution}}. <br> | ||