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Template:Csa Valuation comp: Difference between revisions
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You know that feeling you sometimes get that a business you are obliged to transact with — an insurer or a low-cost airline, for example — is deliberately making things hard for you to understand or challenge, in the hope that a large proportion of the customers simply won’t bother leaving the business to be able to charge for the service without actually providing it? Well, it seems like {{icds}} are doing that here. For in the “Annex” versions of the CSA, ancient and modern, the Dates, Times, Locations and Agents which concern themselves with assessing the Value of the components of Credit Support are rejoice under the adjective “Valuation”. For reasons only known to a cruel almighty, the IM CSD uses the word “Calculation”. Why, readers? ''Why''? | You know that feeling you sometimes get that a business you are obliged to transact with — an insurer or a low-cost airline, for example — is deliberately making things hard for you to understand or challenge, in the hope that a large proportion of the customers simply won’t bother leaving the business to be able to charge for the service without actually providing it? Well, it seems like {{icds}} are doing that here. For in the “Annex” versions of the CSA, ancient and modern, the Dates, Times, Locations and Agents which concern themselves with assessing the Value of the components of Credit Support are rejoice under the adjective “Valuation”. For reasons only known to a cruel almighty, the IM CSD uses the word “Calculation”. Why, readers? ''Why''? | ||
==== | ====Value==== | ||
The {{vmcsa}} adds in the {{csaprov|FX Haircut Percentage}} into the multiplier, that being (in some jurisdictions) a fairly hefty surcharge for those people who like to collateralise in a currency other than the one in which their derivatives are denominated, and also (partially) corrects the snafu about ineligible credit support, at least on a Default. | The {{vmcsa}} adds in the {{csaprov|FX Haircut Percentage}} into the multiplier, that being (in some jurisdictions) a fairly hefty surcharge for those people who like to collateralise in a currency other than the one in which their derivatives are denominated, and also (partially) corrects the snafu about ineligible credit support, at least on a Default. | ||
Once there is a {{ | Once there is a {{{{{1}}}|Default}}, you are working things out, and {{{{{1}}}|FX Haircut Percentage}}s and {{{{{1}}}|Valuation Percentage}}s no longer matter because rather than assigning a ''notional'' value for the asset in the {{{{{1}}}|Base Currency}} ''if'' liquidated — and therefore giving yourself a little buffer for rainy day and so on — ''the rainy day has arrived''. You are ''actually'' liquidating the asset, which will already have yesterday’s haircut applied to it, the counterparty isn’t to be giving you any more, and the money you raise from selling the {{{{{1}}}|Credit Support Balance}}, whether eligible or not, is real money, it really pays down your claim, and you have to account to the Defaulting Party’s administrator for anything left once you have closed out your {{isda}}. | ||
====Valuation/Calculation Date}}==== | ====Valuation/Calculation Date}}==== | ||
The Valuation terms as between {{nycsa}} and {{csa}} didn’t change a great deal: here is a {{diff|86696|86695}}. It got a bit more hinky with the arrival of the [[Modern CSA]]s: here’s a {{diff|86673|86664}} between the 1995 and the 2016 VM CSAs. | The Valuation terms as between {{nycsa}} and {{csa}} didn’t change a great deal: here is a {{diff|86696|86695}}. It got a bit more hinky with the arrival of the [[Modern CSA]]s: here’s a {{diff|86673|86664}} between the 1995 and the 2016 VM CSAs. | ||