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Template:Exposure under csa: Difference between revisions
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Now, on the day you are meant to make that final settlement, which when (ahem — ''if'') settled, would reduce your {{{{{1}}}|Exposure}}, you will call for your {{{{{1}}}|Delivery Amount}} or {{{{{1}}}|Return Amount}} assuming it has not (yet) been paid. By the time the Credit Support adjustment has been settled, that final settlement will have happened, meaning the person who paid the adjustment will be out of pocket, and will need to call it back (using the same process), and will be running overnight credit risk that, if she’d had the choice, she probably wouldn’t have. | Now, on the day you are meant to make that final settlement, which when (ahem — ''if'') settled, would reduce your {{{{{1}}}|Exposure}}, you will call for your {{{{{1}}}|Delivery Amount}} or {{{{{1}}}|Return Amount}} assuming it has not (yet) been paid. By the time the Credit Support adjustment has been settled, that final settlement will have happened, meaning the person who paid the adjustment will be out of pocket, and will need to call it back (using the same process), and will be running overnight credit risk that, if she’d had the choice, she probably wouldn’t have. | ||
The thing | The thing which, I think, causes all the confusion is the nature of payments under ''normal'' {{isdaprov|Transaction}}s are deterministic and generally specified in the {{isdaprov|Confirmation}}, whereas whether you need to make a payment at all under a CSA on any day depends, and how much you need to pay, depends on quite a lot of things and you only find out at the last minute. Therefore CSA payments are due “a regular [[settlement cycle]] after they are called” — loosey goosey, right? — whereas normal swap payments are due (say) “on the 15th of March” | ||
Day 1: Party | Day 1: Party A has an {{{{{1}}}|Exposure}} of 100, and its prevailing {{{{{1}}}|Credit Support Balance}} is 90, so (let’s say, for fun, ''after'' the {{{{{1}}}|Notification Time}} on the {{{{{1}}}|Demand Date}}) Party B has called it for a {{{{{1}}}|Delivery Amount}} of 10, which it must pay but Party B owes it a payment of 10, which is due to land tomorrow. | ||
Fun times in the world of [[collateral]] [[operations]]. | Fun times in the world of [[collateral]] [[operations]]. | ||