Template:Csa credit support amount calculation

How the IA contributes to the Credit Support Amount — being the total value a Transferor must have given to the Transferee at any time^[1] can be mind-boggling.

It pans out for a Transferee like so:

The Transferee’s Exposure - the net mark-to-market value the Transferor would owe the Transferee under all outstanding Transactions if they were closed out (not counting, of course, the 1995 CSA itself). Call this E.
Add to E the total Independent Amount Transferor is required to give the Transferee. Call this IA_t.
E + IA_t is the total amount Transferor would have to hand if it weren’t for ...
Any Independent Amount the Transferee has to pay the Transferor. Call this IA_r.
There’s something faintly absurd both parties exchanging Independent Amounts by title transfer — they net off against each other — but that’s as may be. Stupider things have happened^[2].
Any Threshold that applies to the Transferor - being the minimum MTM amount at which it must pony up variation margin in the first place.

This leaves you with a formula as follows:

Max[0, E + IA_t - (IA_r + Threshold.)

Let's plug in some numbers. Say:

Your Credit Support Amount is therefore 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 Delivery Amount or a Return Amount, in other words — that depends whether the Credit Support Amount is greater or smaller than your prevailing Credit Support Balance.

↑ As opposed to the total amount required to be paid on any day, considering the “Credit Support Balance” the Transferee already holds — that’s the Delivery Amount or Return Amount, as the case may be.
↑ SFTR disclosure, for example.