Template:Credit support amount capsule: Difference between revisions

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→‎No {{csaprov|Independent Amount}}s

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 =====No {{csaprov|Independent Amount}}s=====
-Life is much simpler in the world of regulatory [[variation margin]] for which the {{2016csa}} is designed. Its only concern is  [[variation margin]]. That is, there ''are'' no {{csaprov|Independent Amount}}s.<ref>Well, alright, ''should be'' no {{csaprov|Independent Amount}}s. {{csaprov|Independent Amount}}s are there to protect counterparties against ''potential'' swings in {{vmcsaprov|Exposure}} that might happen before the next margin call: that is, they are a buffer against ''the risk'' of market moves. But a [[title transfer]] of collateral to cover an {{vmcsaprov|Exposure}} that doesn’t yet, and might never, exist creates an ''actual'' exposure the other way: the {{csaprov|Transferee}} of an {{csaprov|Independent Amount}} would be indebted to the {{csaprov|Transferor}} for its return.
+Life is much simpler in the world of regulatory [[variation margin]] for which the {{2016csa}} is designed. Its only concern is  [[variation margin]]. That is, there ''are'' no {{csaprov|Independent Amount}}s.<ref>Well, alright, ''should be'' no {{csaprov|Independent Amount}}s.</ref> In the old {{csa}}, {{csaprov|Independent Amount}}s were there to protect counterparties against ''potential'' swings in {{vmcsaprov|Exposure}} that might happen before the next margin call: that is, they are a buffer against ''the risk'' of market moves.
-That said, there is a custom-built addition in Paragraph {{vmcsaprov|11}} that lets you build an {{csaprov|Independent Amount}} concept back in if you want one. And who, in their right [[chicken-licken]]y mind, wouldn’t want one?</ref>
+But in the old world, {{csaprov|Independent Amount}}s were transferred outright to the Transferee, by title transfer.<ref>Under Engliush law CSAs, at any rate. But the effect was the same where [[rehypothecation]] was allowed under a {{1994csa}} too.</ref> This created a conceptual issue for regulators, who were trying to ''minimise'' credit exposure between the parties: a [[title transfer]] of [[collateral]] to cover an {{vmcsaprov|Exposure}} that doesn’t yet — and might never — exist creates a ''negative'' exposure, because the holder of an {{csaprov|Independent Amount}} would be indebted to the {{csaprov|Transferor}} for its return.<ref>Hence, [[regulatory initial margin]] cannot be [[cash]], and must be [[Pledge|pledged]] and not [[title transfer]]red.</ref>
+All that said, there is a custom-built addition in Paragraph {{vmcsaprov|11}}<ref>For more information see {{csaprov|Credit Support Amount (VM/IA)}}.</ref> that lets you build an {{csaprov|Independent Amount}} concept back in if you really want one. And who, in their right [[chicken-licken]]y mind, wouldn’t?
 =====No {{csaprov|Threshold}} either=====