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Transaction terminations and VM (view source)
Revision as of 23:44, 17 September 2022
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}}Now the timings of the various payments under the ISDA architecture lead to one rather odd effect: | }}Now the timings of the various payments under the ISDA architecture lead to one rather odd effect: | ||
If you have an existing {{isdaprov|Transaction}} with a large [[MTM]] exposure, that is currently collateralised with [[variation margin]], as it almost certainly will be, and then the [[in-the-money]] party decides to realise the value of that Transaction (or — I dunno — the swap just gets to its scheduled termination date, then you have a | If you have an existing {{isdaprov|Transaction}} with a large [[MTM]] exposure, that is currently collateralised with [[variation margin]], as it almost certainly will be, and then the [[in-the-money]] party decides to realise the value of that Transaction (or — I dunno — the swap just gets to its scheduled termination date, then you have a couple of opposite things that have to happen. | ||
*The [[out-of-the-money]] counterparty has to pay the termination value of the {{isdaprov|Transaction}}; and | *The [[out-of-the-money]] counterparty has to pay the termination value of the {{isdaprov|Transaction}}; and | ||