Template:Emissions Cost of Carry Amount summ: Difference between revisions

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Template:Emissions Cost of Carry Amount summ (view source)

Revision as of 17:34, 16 October 2023

263 bytes added ,  16 October 2023
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(Created page with "Ok the concept is this. :(i) you have your '''accrual rate''' over the period in question. This is, in all three formats, called the “{{{{{1}}}|Cost of Carry Rate}}”. :(ii) you have the '''accrual period''' over which the {{{{{1}}}|Cost of Carry Rate}} is applied. This is called, in the ISDA, the {{euaprov|Cost of Carry Delay}} but in the EFET and the IETA is called the {{{{{1}}}|Cost of Carry Calculation Period}}. :(iii) you have the '''quantity of affected Allowa...")
 
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Ok the concept is this.
What is going on here, then?
:(i) you have your '''accrual rate''' over the period in question. This is, in all three formats, called the “{{{{{1}}}|Cost of Carry Rate}}”.
 
:(ii) you have the '''accrual period''' over which the {{{{{1}}}|Cost of Carry Rate}} is applied. This is called, in the ISDA, the {{euaprov|Cost of Carry Delay}} but in the EFET and the IETA  is called the {{{{{1}}}|Cost of Carry Calculation Period}}.
Should there be a {{{{{1}}}|Suspension Event}}, the person meaning to deliver the {{{{{1}}}|Allowances}}, and receive cash payment on date X cannot, and will therefore start to get anxious emails from her treasury department. Remember, at this point she wants cash, has ([[Q.E.D.]]) no interest in the {{{{{1}}}|Allowances}}, and through no fault of her own is out of pocket.
:(iii) you have the '''quantity of affected Allowances''', being in ISDA the {{euaprov|Number of Allowances}} delivered by the {{euaprov|Delayed Delivery Date}}, in EFET being the {{efetaprov|Number of Transferred Allowances}} and in IETA being the number of {{ietaprov|Period Traded Allowance}}s {{ietaprov|Transfer}}red;
 
:(iv) you have your '''strike price''' for the {{{{{1}}}|Allowances}}: ISDA it is the {{euaprov|Allowance Forward Price}} or (in for options) {{euaprov|Allowance Strike Price}}, in the EFET it is the {{efetaprov|Contract Price}} and in the IETA is it the {{ietaprov|Allowance Price}}.
Therefore the {{{{{1}}}|Seller}} agrees to pay her a {{{{{1}}}|Cost of Carry Amount}}. This is essentially interest at an agreed rate on the Cash Payment that was due, for the duration of the the {{{{{1}}}|Suspension Event}}.
The Cost of Carry Amount is calculated according to the following formulae, which we ''really'' hope amount to the same thing, but let’s see: <br>
 
ISDA: <br>
The funny thing is what happens of the {{{{{1}}}|Suspension Event}} has not lifted by the {{{{{1}}}|Long Stop Date}}. Here the transaction is deemed to be irretrievably broken — call it a Force Majeure, Illegality, whatever, and the {{{{{1}}}|Transaction}} is cancelled. Any amounts already paid are refunded (except to the extent {{{{{1}}}|Allowances}} were delivered against payment), and everyone walks away and pretends it never happens.
EFET: <br>
 
IETA: <br>
This, I have to tell you, the JC finds utterly ''extraordinary''. Your {{{{{1}}}|Cost of Carry Amount}} accrues ... accrues ... accrues ... and then suddenly in a puff and illogic on a completely arbitrary {{{{{1}}}|Long Stop Date}}, just vanishes, along with, presumably, all the rest of the money you stumped up in good faith to finance some other so-and-so’s {{{{{1}}}|Allowance}} obligations.
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