Template:Isda 5(a)(iii) general: Difference between revisions

For paranoia junkies and conspiracy theorists amongst you, note the long reach this event of default gives to a {{{{{1}}}|Cross Default}} provision. Now, granted, in the ordinary course {{{{{1}}}|Cross Default}} keys off [[borrowed money]] or [[indebtedness]], and by common convention that does not count [[out-of-the-money]] exposures under derivative contracts, so the {{isdama}}’s own events of default should not exacerbate your cross-default risk under other contracts. Unless you widen {{{{{1}}}|Specified Indebtedness}} to include derivative exposures, as some counterparties do.

Now we see that courtesy of Section {{{{{1}}}|5(a)(iii)}}, a default by my {{{{{1}}}|Credit Support Provider}} (which, remember, need not be my parent: it may be an unaffiliated third-party like a bank writing a [[letter of credit]] or financial [[guarantee]]) is also default under my {{isdama}}, even where I personally am fully [[Solvency|solvent]], in [[good standing]], of sound credit and up-to-date with my rent, outgoings, credit card payments and so on.