Template:Isda Threshold Amount summ: Difference between revisions

The {{isdaprov|Threshold Amount}} is a key feature of the {{isdaprov|Cross Default}} {{isdaprov|Event of Default}} in the {{isdama}}. It is the level over which accumulated [[indebtedness]] defaults comprise an {{isdaprov|Event of Default}}. It is usually defined as a [[cash]] amount or a percentage of [[Tier 1 capital|shareholder funds]], or both, in which case — [[Trick for young players|schoolboy error]] hazard alert — be careful to say whether it is the greater or lesser of the two.  

Because of the [[snowball effect]] that a {{tag|cross default}} clause can have on a party’s insolvency it should be big: like, [[bankruptcy|life-threateningly]] big — because the consequences of triggering a {{isdaprov|Cross Default}} are dire, and it may create its own chain reaction beyond the ISDA itself. So expect to see, against a [[swap dealer]], 2-3% of shareholder funds, or sums in the order of hundreds of millions of dollars. For [[end users]] the number may well be a lot lower (especially for thinly capitalised investment vehicles like [[Hedge fund|fund]]s  — like, ten million dollars or so — and, of course, will key off [[NAV]], not shareholder funds.