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Template:Csa Default under title transfer CSAs summ: Difference between revisions
Template:Csa Default under title transfer CSAs summ (view source)
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=====Why does it reference “Unpaid Amounts”?===== | =====Why does it reference “Unpaid Amounts”?===== | ||
While technically a {{ttcsa}} is a {{isdaprov|Transaction}} in its own right, it is still a ''weird'' {{isdaprov|Transaction}}. The standard “[[replacement cost]]” valuation method doesn’t work brilliantly: whereas a normal Swap Transaction has defined payments upfront, each of which can be valued and discounted back to the present to reveal a [[present value]], payment obligations under a | While technically a {{ttcsa}} is a {{isdaprov|Transaction}} in its own right, it is still a ''weird'' {{isdaprov|Transaction}}. The standard “[[replacement cost]]” valuation method doesn’t work brilliantly: whereas a normal Swap Transaction has defined payments upfront, each of which can be valued and discounted back to the present to reveal a [[present value]], payment obligations under a CSA depend on the aggregate discounted cashflows of all the ''other'' {{isdaprov|Transaction}}s under your {{isdama}} which the CSA covers. So good luck determining, in the abstract, the “[[replacement cost]]” of something like that. | ||
But the good news is you don’t have to: the {{{{{1}}}|Credit Support Balance}} isn’t calculated by reference to discounted future cashflows: rather, it is just the inverse of the aggregate present value of all the other {{isdaprov|Transactions}} under the {{isdama}}. Which figures: that is, after all, what the CSA is suppose to produce. So the “[[replacement cost]]” on any day is just the prevailing value of the {{{{{1}}}|Credit Support Balance}}. It’s easier to treat that as an {{isdaprov|Unpaid Amount}} (none of this tedious mucking about with replacement costs and so on). But that means you have to deem the {{isdaprov|Close-Out Amount}} as zero. | But the good news is you don’t have to: the {{{{{1}}}|Credit Support Balance}} isn’t calculated by reference to discounted future cashflows: rather, it is just the inverse of the aggregate present value of all the other {{isdaprov|Transactions}} under the {{isdama}}. Which figures: that is, after all, what the CSA is suppose to produce. So the “[[replacement cost]]” on any day is just the prevailing value of the {{{{{1}}}|Credit Support Balance}}. It’s easier to treat that as an {{isdaprov|Unpaid Amount}} (none of this tedious mucking about with replacement costs and so on). But that means you have to deem the {{isdaprov|Close-Out Amount}} as zero. | ||