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Independent Amount - CSA Provision: Difference between revisions
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Independent Amount - CSA Provision (view source)
Revision as of 04:23, 31 December 2019
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{{initialmargindescription}} | {{initialmargindescription}} | ||
If you look at it cold, this looks like a fixed currency amount that is paid at the beginning of a relationship, irrespective of how many {{isdaprov|Transactions}} you may have on. But it will be often defined as “an amount agreed between the parties or as otherwise advised by Party X”, which rather kicks the issue in to touch. In practice, it’s likely to be articulated as a multiplier on notional, and will be payable at the start of each {{isdaprov|Transaction}}, and may be adjusted on the fly. | If you look at it cold, this looks like a fixed currency amount that is paid at the beginning of a relationship, irrespective of how many {{isdaprov|Transactions}} you may have on. But it will be often defined as “an amount agreed between the parties or as otherwise advised by Party X”, which rather kicks the issue in to touch. In practice, it’s likely to be articulated as a multiplier on notional, and will be payable at the start of each {{isdaprov|Transaction}}, and may be adjusted on the fly. | ||
:For example, a [[dealer]] who sets IA by reference to the perceived volatility of the {{isdaprov|Transaction}} might reserve the right to increase | :For example, a [[dealer]] who sets [[IA]] by reference to the perceived volatility of the {{isdaprov|Transaction}} might reserve the right to increase [[IA]] should that volatility unexpectedly change. You can be sure more than one risk officer embarked on an undignified scramble for {{sex|her}} margin tables — and put in a desperate call to [[Legal]] — the day UK decided [[Brexit means Brexit]]<ref>and [[sterling]] [[gapped]] down 8%</ref>, for example. | ||
Particularly where underlying trades and markets are volatile, expect to see much customisation. | Particularly where underlying trades and markets are volatile, expect to see much customisation. | ||