82,900
edits
Template:Isda 2(a)(iii) summ: Difference between revisions
→Even normal days, these days?
Amwelladmin (talk | contribs) |
Amwelladmin (talk | contribs) |
||
| Line 24: | Line 24: | ||
===Even normal days, ''these'' days?=== | ===Even normal days, ''these'' days?=== | ||
Even setting aside the successive calumnies the modern world seems intent on lurching between, the idea of a [[flawed asset]] provision seems well and truly out of date. The overriding mischief that it addresses arises when a solvent swap counterparty with a long-dated [[out-of-the-money]] portfolio, finds its counterparty has, against the run of play, gone bust. If I am in the hole to you to the tune of $50 million, but that liability isn’t due to mature for ten years, in which time it might well come right and even go positive, I don’t want to crystallise it now, at the darkest point, just because ''you'' sir have gone tits-up. | |||
Answer: insert a flawed asset provision. This lets me suspend my performance on your default, ''without'' closing you out, until you have got your house in order and paid all the transaction flows you owe me. So the portfolio goes into suspended animation. Like Han Solo in ''The Empire Strikes Back''. | Answer: insert a flawed asset provision. This lets me suspend my performance on your default, ''without'' closing you out, until you have got your house in order and paid all the transaction flows you owe me. So the portfolio goes into suspended animation. Like Han Solo in ''The Empire Strikes Back''. | ||