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===Calculating your {{ | ===Calculating your {{{{{1}}}|Credit Support Amount}}=== | ||
Superficially things are quite different between the {{csa}} and the {{vmcsa}}, but this all boils down to the fact that the {{vmcsa}} is ''meant'' to be a zero-threshold, [[variation margin]]-only affair, so the concepts of {{csaprov|Independent Amount}} and {{csaprov|Threshold}}, both of which confuse the {{csa}}, aren’t there to get in the way. Unless you go and put them in anyway, as we shall see... | |||
===={{csa}}==== | |||
How the {{csaprov|IA}} contributes to the {{csaprov|Credit Support Amount}} — being the amount of credit support in total that one party must have given the other at any time<ref>As opposed to the amount required to be transferred ''on that day'', considering the “{{csaprov|Credit Support Balance}}” the {{csaprov|Transferee}} already holds — that’s the {{csaprov|Delivery Amount}} or {{csaprov|Return Amount}}, [[as the case may be]].</ref> under the {{csa}} can be mind-boggling. | |||
It pans out for a {{csaprov|Transferee}} like so: | |||
*{{csaprov|Exposure}} | *'''The {{csaprov|Transferee}}’s {{csaprov|Exposure}}''': the net [[mark-to-market]] value the {{csaprov|Transferor}} would owe the {{csaprov|Transferee}} under all outstanding {{isdaprov|Transactions}} if they were [[closed out]] (not counting, of course, the {{csa}} itself). Call this '''E<sub>Tee</sub>'''. | ||
*The IA<sub> | *The '''{{csaprov|Transferor}}’s {{csaprov|Independent Amount}}''': The total {{csaprov|Independent Amount}} {{csaprov|Transferor}} must give the {{csaprov|Transferee}} we will call '''IA<sub>Tor</sub>'''. You can add this to the {{csaprov|Transferee}}’s {{csaprov|Exposure}}, but then you must remember to deduct ... | ||
*IA<sub> | *The '''{{csaprov|Transferee}}’s {{csaprov|Independent Amount}}''': Any {{csaprov|Independent Amount}} the {{csaprov|Transferee}} has to pay the {{csaprov|Transferor}}. Call this '''IA<sub>Tee</sub>'''. <ref>There’s something faintly absurd both parties exchanging {{csaprov|Independent Amounts}} by [[title transfer]] — they net off against each other — but that’s as may be. Stupider things have happened. [[SFTR]] disclosure, for example.</ref>. Lastly don’t forget to take into account ... | ||
* | *The '''{{csaprov|Transferor}}’s {{csaprov|Threshold}}''': Any {{csaprov|Threshold}} that applies to the {{csaprov|Transferor}} being the {{csaprov|Exposure}} it is allowed to represent before it has to post [[variation margin]] in the first place.<br /> | ||
This leaves you with a formula for a {{csaprov|Transferee}}’s {{csaprov|Credit Support Amount}} as follows: '''''Max[0, (E<sub>Tee</sub> + IA<sub>Tor</sub> - IA<sub>Tee</sub> + Threshold)].''''' | |||
Now, whether you have to ''pay'' anything or ''receive'' anything as a result — whether there is a {{csaprov|Delivery Amount}} or a {{csaprov|Return Amount}}, in other words — | Let’s plug in some numbers. Say: | ||
*The {{csaprov|Transferee}}’s {{csaprov|Exposure}} is 10,000,000 | |||
*The {{csaprov|Transferor}}’s {{csaprov|Independent Amount}} IA<sub>Tor</sub> is 2,000,000 | |||
*The {{csaprov|Transferee}}’s {{csaprov|Independent Amount}} IA<sub>Tee</sub> is 0 | |||
*The {{csaprov|Transferor}}’s {{csaprov|Threshold}} is 5,000,000 | |||
Your {{csaprov|Credit Support Amount}} is therefore the greater of zero and ''10,000,000 + 2,000,000 - 0 + 5,000,000) = '''7,000,000'''''. | |||
Now, whether you have to ''pay'' anything or ''receive'' anything as a result — whether there is a {{csaprov|Delivery Amount}} or a {{csaprov|Return Amount}}, in other words — depends whether your {{csaprov|Credit Support Amount}} is greater or smaller than your prevailing {{csaprov|Credit Support Balance}}, by at least the {{csaprov|Minimum Transfer Amount}}. | |||
===={{vmcsa}} with no [[IA]] amendment==== | |||
Since the {{vmcsa}} assumes there is no Independent Amounts and no Thresholds, it is quite a lot easier. It is just the {{vmcsaprov|Exposure}}. So much so, that there isn’t even a concept of the “{{vmcsaprov|Credit Support Amount}}” under the {{vmcsa}}, ''unless you have retrofitted one'', and who in their right mind would do that? | |||
Oh. | |||
You have, haven’t you. You’ve gone and co-opted the {{vmcsaprov|Credit Support Amount (VM/IA)}} concept in your Paragraph {{vmcsaprov|11}} elections. Yes you did. No, don’t blame your [[credit department]]; don’t say you were just following orders. ''You'' did it. | |||
===={{vmcsa}} with a customised [[IA]] amendment==== | |||
Never mind. Well, just for you, the formula is a sort of half-way house: Under this unholy bastardisation of a {{vmcsa}}, a {{vmcsaprov|Transferee}}’s {{vmcsaprov|Credit Support Amount}} will be: '''''Max[0, (E<sub>Tee</sub> + IA<sub>Tor</sub> - IA<sub>Tee</sub>)]'''''. <br> |