Template:Dust capsule
{{{{{1}}}|Default Under Specified Transaction}} — colloquially, “{{{{{1}}}|DUST}}” — is often confused with {{{{{1}}}|Cross Default}}. In fact, they’re meant to be mutually exclusive. That won’t stop folks conflating them, though. Look, we all do it.
{{{{{1}}}|DUST}} is like {{{{{1}}}|Cross Default}}, but where {{{{{1}}}|Cross Default}} references indebtedness owed to third parties, {{{{{1}}}|DUST}} is all about non-“borrowing” style transactions — e.g., swap agreements, stock loans[1] and repos, but only transactions between the two counterparties[2].
If a Counterparty[3] experiences an {{{{{1}}}|Event of Default}} under a swap agreement (or other “{{{{{1}}}|Specified Transaction}}”[4] with you, this will be an {{{{{1}}}|Event of Default}} under the ISDA Master Agreement.
- ↑ I know these sound like borrowing transactions, but they’re fully collateralised, and in fact aren’t.
- ↑ And — sigh — their {{{{{1}}}|Credit Support Provider}}s and {{{{{1}}}|Specified Entities}}.
- ↑ Or — sigh — its {{{{{1}}}|Credit Support Provider}} or {{{{{1}}}|Specified Entity}}
- ↑ This is typically wide, though it excludes borrowed money — but check the Agreement!