Template:Csa exchanges: Difference between revisions

A counterparty who has posted one form of {{{{{1}}}prov|Eligible Credit Support}} and can ask the {{{{{1}}}prov|Transferee}} to switch it for something else. The {{{{{1}}}prov|Transferee}} doesn’t have to, but derivatives counterparties being the reasonable commercial fellows they are — and their operations teams being no-nonsense pragmatists ''they'' are — they will generally allow this as part of the normal ebb and flow of collateral operations. Probably less of a thing now {{vmcsa}}s tend to be cash only and base currency cash at that, but the possibility remains, and as, to our enduring regreet, we know, {{icds}} is not usually one to let unexplored possibilities go undocumented.

Note here the {{{{{1}}}prov|Transferor}} can ask for an exchange, but the {{{{{1}}}prov|Transferee}} is not obliged to accept it. This is a fundamental provision of “title transfer”: once the {{{{{1}}}prov|Eligible Credit Support}} is delivered under a [[title-transfer]] {{csa}}, the {{{{{1}}}prov|Transferee}} owns it absolutely. It only has to return {{{{{1}}}prov|Equivalent Credit Support}}. This is a special, [[ISDA ninja|legal ninja]]<ref>Oh, all right, and [[GMSLA]] [[ninja]], [[Repo]] [[ninja]] and other kinds of [[ninja]]s too.</ref> use of the word “[[equivalent]]”. It means “[[fungible]]”; ''exactly the same as ~''; not “broadly similar to ~”.

This is important also from a pricing (and operational) perspective: otherwise the {{{{{1}}}prov|Transferor}} would have a “worst-of” [[option]] and would be entitled to continually switch into the "cheapest to deliver" of the {{{{{1}}}prov|Eligible Credit Support}}. Needless to say, the increased collateral flows would also increase the operational burden.

'''{{{{{1}}}prov|Delivery Amount}}s''': Contrast this with {{{{{1}}}prov|Delivery Amounts}}, where a {{{{{1}}}prov|Transferor}} has the [[cheapest to deliver|option to deliver the cheapest]] of the {{{{{1}}}prov|Eligible Credit Support}} specified in the {{1995csa}}.

'''{{{{{1}}}prov|Return Amount}}s''': A {{{{{1}}}prov|Transferee}} does have a (limited) option in terms of selecting the {{{{{1}}}prov|Return Amount}} should there be a requirement to return posted [[credit support]]: it can select the cheapest to deliver of all the {{{{{1}}}prov|Eligible Credit Support}} that has been posted to it which currently comprises its {{{{{1}}}prov|Credit Support Balance}}.