Template:Csa credit support amount calculation: Difference between revisions

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-===Calculating your {{csaprov|Credit Support Amount}}===
+===Calculating your {{{{{1}}}|Credit Support Amount}}===
-How the {{csaprov|IA}} contributes to the {{csaprov|Credit Support Amount}} — being the total value a {{csaprov|Transferor}} must have given to the {{csaprov|Transferee}} at any time<ref>As opposed to the total amount required to be paid ''on any 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> can be mind-boggling.
+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:
-#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'''.
+*'''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>'''.
-#Add to E the total {{csaprov|Independent Amount}} {{csaprov|Transferor}} is required to give the {{csaprov|Transferee}}. Call this '''IA<sub>t</sub>'''. <br>''E + IA<sub>t</sub> is the total amount {{csaprov|Transferor}} would have to hand if it weren’t for ...
+*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 ...
-#Any {{csaprov|Independent Amount}} the {{csaprov|Transferee}} has to pay the {{csaprov|Transferor}}. Call this '''IA<sub>r</sub>'''.<br>''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<ref>[[SFTR]] disclosure, for example.</ref>.''
+*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 ...
-#Any {{csaprov|Threshold}} that applies to the {{csaprov|Transferor}} - being the minimum MTM amount at which it must pony up variation margin in the first place.<br />
+*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 as follows:
+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)].'''''
-:''Max[0, E + IA<sub>t</sub> - (IA<sub>r</sub> + Threshold.)''
-Let's plug in some numbers. Say:
+Let’s plug in some numbers. Say:
-*{{csaprov|Exposure}} is 10,000,000
+*The {{csaprov|Transferee}}’s {{csaprov|Exposure}} is 10,000,000
-*The IA<sub>t</sub> you owe him: 2,000,000
+*The {{csaprov|Transferor}}’s {{csaprov|Independent Amount}} IA<sub>Tor</sub> is 2,000,000
-*IA<sub>r</sub> he owes you: 0
+*The {{csaprov|Transferee}}’s {{csaprov|Independent Amount}} IA<sub>Tee</sub> is 0
-*Your {{csaprov|Threshold}}: 5,000,000
+*The {{csaprov|Transferor}}’s {{csaprov|Threshold}} is 5,000,000
-Your {{csaprov|Credit Support Amount}} is therefore ''10,000,000 + 2,000,000 - (0 + 5,000,000) = '''7,000,000'''''.
+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 — that depends whether the {{csaprov|Credit Support Amount}} is greater or smaller than your prevailing {{csaprov|Credit Support Balance}}.
+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>