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Template:Flawed asset capsule: Difference between revisions
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Following certain default events,<ref>Exactly ''which'' defaults will depend on the contract: under an {{isdama}} it will include | Following certain default events,<ref>Exactly ''which'' defaults will depend on the contract: under an {{isdama}} it will include Events of Default and Potential Events of Default, but not Termination Events or Additional Termination Events — which, given the “culpability” of [[ATE]]s, is something of a dissonance in itself.</ref> a “[[flawed asset]]” provision allows an innocent, but [[out-of-the-money]] counterparty to a {{tag|derivative}} or {{tag|securities finance}} transaction to suspend performance of its obligations ''without'' terminating the transaction and thereby crystallising a [[mark-to-market]] loss implied by its out-of-the-money position. | ||
The defaulting party’s asset – its right to be paid, or delivered to under the transaction – is “flawed” in the sense that it doesn’t apply for so long as ''the [[conditions precedent]] to payment are not fulfilled''. | The defaulting party’s asset – its right to be paid, or delivered to under the transaction – is “flawed” in the sense that it doesn’t apply for so long as ''the [[conditions precedent]] to payment are not fulfilled''. | ||