84,207
edits
Template:Csa IA Threshold MTA summ: Difference between revisions
Jump to navigation
Jump to search
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 3: | Line 3: | ||
{{L1}}'''{{{{{1}}}|Independent Amount}}''' or “'''{{{{{1}}}|IA}}'''”: How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice. There isn’t an {{{{{1}}}|Independent Amount}} in a [[Modern CSA|modern variation margin CSA]] for reasons canvassed in the {{premium}}.<li> | {{L1}}'''{{{{{1}}}|Independent Amount}}''' or “'''{{{{{1}}}|IA}}'''”: How much do you have to leave with the other guy, over and above your mark-to-market {{{{{1}}}|Exposure}}, to make things nice. There isn’t an {{{{{1}}}|Independent Amount}} in a [[Modern CSA|modern variation margin CSA]] for reasons canvassed in the {{premium}}.<li> | ||
'''{{{{{1}}}|Threshold}}''': Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin. There isn’t | '''{{{{{1}}}|Threshold}}''': Is there any lower limit of {{{{{1}}}|Exposure}} that you might have to wait for before being able to call, or be obliged to post, variation margin. There isn’t a {{{{{1}}}|Threshold}} in a [[Modern CSA|modern variation margin CSA]], either, for reasons also canvassed in the {{premium}}. But they are somewhat related.<li> | ||
'''{{{{{1}}}|Minimum Transfer Amount}}''' or “'''{{{{{1}}}|MTA}}'''”: Assuming you are over your {{{{{1}}}|Threshold}}, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?</ol> | '''{{{{{1}}}|Minimum Transfer Amount}}''' or “'''{{{{{1}}}|MTA}}'''”: Assuming you are over your {{{{{1}}}|Threshold}}, is there a “smallest integral amount” of incremental {{{{{1}}}|Exposure}} that must arisen before a posting obligation arises and anyone has to go to the trouble of paying out?</ol> | ||
These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as [[initial margin]]: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to ''never'' post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd [[Non-financial counterparty|NFC]] in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for. | These three levers do different things: {{{{{1}}}|Independent Amount}} is what is now colloquially referred to as [[initial margin]]: it is a buffer that just sits there for a rainy day. {{{{{1}}}|Threshold}} allows you to set a point where okay yes my credit people are now officially freaking out and you need to make them less freaky fast. So the {{{{{1}}}|Threshold}} will typically be a big number. You cross it once, and the CSA starts up. If you drop below it, the CSA stops again. If one or other party wishes to ''never'' post {{{{{1}}}|Credit Support}} (did happen, not really nowadays with regulatory VM, but there is the odd [[Non-financial counterparty|NFC]] in this bucket) you would set your {{{{{1}}}|Threshold}} at “Infinity”. The {{{{{1}}}|Minimum Transfer Amount}} is usually a small, round number (say USD1m, or USD5m) that reflects the fact that small movements in {{{{{1}}}|Exposure}} are not really worth getting your collateral ops steampunk machine fired up for. | ||