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→Expected events and tail events
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{{isdaprov|Events of Default}} and {{isdaprov|Termination Events}} permit an innocent party to [[close out]] {{isdaprov|Transactions}} early, should the counterparty breach the agreement, or its creditworthiness deteriorate in more or less oblique ways contrived by the credit department. Some of the Termination Events are concerned with other externalities — change in law, force majeure, tax matters — that don’t directly affect either party’s credit position.) | {{isdaprov|Events of Default}} and {{isdaprov|Termination Events}} permit an innocent party to [[close out]] {{isdaprov|Transactions}} early, should the counterparty breach the agreement, or its creditworthiness deteriorate in more or less oblique ways contrived by the credit department. Some of the Termination Events are concerned with other externalities — change in law, force majeure, tax matters — that don’t directly affect either party’s credit position.) | ||
=====Expected events and tail events===== | =====Expected events and tail events===== | ||
We can, in any case, distinguish between welcome “expected events” and unwelcome | We can, in any case, distinguish between welcome “expected events” and unwelcome “[[tail events]]”. | ||
“Expected events” are the risks you assume by entering the swap in the first place: the economically significant things you believe may, or may not, happen. If these things do not go how you hoped, there is no complaint: that is the bargain you struck. The forward value of goods and rates you agree to exchange. | “Expected events” are the risks you assume by entering the swap in the first place: the economically significant things you believe may, or may not, happen. If these things do not go how you hoped, there is no complaint: that is the bargain you struck. The forward value of goods and rates you agree to exchange. | ||