Template:Csa Interest comp

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Interest Payment

Some development from the OG to the 2016 ISDA VM CSA that came about when ISDA’s crack drafting squad™, bless them, contrived in Para {{{{{1}}}|5(c)(ii)}} to design an option no-one in their right mind would have wanted, namely to choose between {{{{{1}}}|Interest Transfer}} — in which you can have interest that accrues on your {{{{{1}}}|Credit Support Balance}} periodically paid to you — or {{{{{1}}}|Interest Amount}}, in which interest accruals are just capitalised and added to the {{{{{1}}}|Credit Support Balance}}, effectively folding all that into the weft and warp of daily transfers that you will be making anyway.

Interest Period

Some development from the OG to the 2016 VM CSA that came about when ISDA’s crack drafting squad™, bless them, contrived in Para {{{{{1}}}|5(c)(ii)}} to design an option no-one in their right mind would have wanted, namely to choose between {{{{{1}}}|Interest Transfer}} — in which you can have interest that accrues on your Credit Support Balances periodically paid to you — or {{{{{1}}}|Interest Amount}}, in which interest accruals are added to the {{{{{1}}}|Credit Support Balance}}, effectively folding all that into the weft and warp of daily transfers that you will be making anyway.

To be fair to them, the OG only contemplated transfer of accrued interest, which in the context of a modern, daily margined swap business, is barking mad, so at least having the option to just capitalise interest is better than not having it.

But better still would be just straight out capitalising interest, with no option to transfer it. Perhaps this is just me.

Interest Amount

The sole observable changes between the 1995 CSA and the 2016 VM CSA are, as best as this poor boy can fathom, these:

  1. The (rather tedious) expression “... on the principal amount of the portion of the Credit Support Balance” amount has been massaged to the slightly more elegant “...on the portion of the Credit Support Balance”, although you’d have to say this is mostly likely to be a drafting error rather than some kind of late-life Damascene conversion in ISDA’s crack drafting squad™’s part to the merits of plain English.
  2. The last paragraph contemplates currencies other than sterling having an Act/365 day count fraction.
  3. The {{{{{1}}}|Negative Interest}} guff.