Template:M summ 1992 ISDA Loss: Difference between revisions

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{{isda92prov|Loss}} is a means of valuing {{isda92prov|Transactions}} following their {{isda92prov|Early Termination}} under the {{1992isda}}.  
{{isda92prov|Loss}} is a means of valuing {{isda92prov|Transaction}}s following their {{isda92prov|Early Termination}} under the {{1992isda}}.  


Spoddy point: unlike its alternative {{isda92prov|Market Quotation}}, “{{isda92prov|Loss}}” ''includes'' the “{{isda92prov|Unpaid Amount}}” concept in its definition:  
Spoddy point: unlike its alternative {{isda92prov|Market Quotation}}, “{{isda92prov|Loss}}” ''includes'' the “{{isda92prov|Unpaid Amounts}}” concept in its definition:  
:''...{{isda92prov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant {{isda92prov|Early Termination Date}} and not made, except, so as to avoid duplication, if Section {{isda92prov|6(e)(i)}}(1) or (3) or {{isda92prov|6(e)(ii)}}(2)(A) applies...''
:“...{{isda92prov|Loss}} includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant {{isda92prov|Early Termination Date}} and not made, except, so as to avoid duplication, if Section {{isda92prov|6(e)(i)}}(1) or (3) ''[i.e., either version of {{isdaprov|First Method}}]'' '''{{font colour|green|or}}''' {{isda92prov|6(e)(ii)}}(2)(A) ''[i.e., {{isdaprov|Second Method}} and {{isdaprov|Market Quotation}}]'' applies...”


===Duplication? What duplication? Ohhhh — ''that'' duplication.===
Note that the green '''{{font colour|green|or}}''' above a deliberately conjunctive or, so the only situation to which it doesn’t apply is where {{isdaprov|Second Method}} ''[[and]]'' {{isdaprov|Loss}} applies. It is truly hard to imagine what must have been going through the head of {{icds}} when it came up with this formulation, if it wasn’t purely to intimidate and ward off [[ISDA ingénues]] — it bears the hallmarks of a preoccupied mind: one going through a messy divorce, midlife crisis or religious revelation of some sort — but it bears repeating that there are some intuitions who still prefer the {{1992ma}}.
The “except, so as to avoid duplication” coda ''looks'' to be a magnificent piece of discombobulation from our old friends in {{icds}} — and in the final analysis, it is, but not for the reasons you think it first — because at first blush there doesn’t seem to ''be'' any risk of duplication: the excluded paragraphs all deal exclusively with {{isdama}}s where {{isda92prov|Market Quotation}}, and not {{isda92prov|Loss}}, applies. So this {{isda92prov|Loss}} definition seems entirely irrelevant ... until you notice that {{isda92prov|Settlement Amount}} used when valuing with {{isda92prov|Market Quotation}} — stay with me here — defaults to {{isda92prov|Loss}}<ref>{{isda92prov|Loss}} ''not counting {{isda92prov|Unpaid Amounts}}'', that is — makes you weep, doesn’t it?</ref> when, as most assuredly it will, {{isda92prov|Market Quotation}} turns out to be a totally impractical means of valuing a {{isda92prov|Terminated Transaction}}, since ''no-one will give you a price for a trade they can’t actually enter''.


So, yes it ''is'' a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that {{isda92prov|Market Quotation}} is waste of space anyway.
{{loss duplication capsule}}
 
Whatever, it is simply magical that {{icds}} saw fit to treat {{isda92prov|Loss}}, but ''not'' {{isda92prov|Market Quotation}}, as being converted into a {{isda92prov|Termination Currency Equivalent}} including {{isda92prov|Unpaid Amounts}}, especially as {{isda92prov|Loss}} is a fallback when {{isda92prov|Market Quotation}} fails to work, as inevitably it will.

Latest revision as of 17:24, 17 March 2020

Loss is a means of valuing Transactions following their Early Termination under the 1992 ISDA.

Spoddy point: unlike its alternative Market Quotation, “Loss” includes the “Unpaid Amounts” concept in its definition:

“...Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) [i.e., either version of First Method] or 6(e)(ii)(2)(A) [i.e., Second Method and Market Quotation] applies...”

Note that the green or above a deliberately conjunctive or, so the only situation to which it doesn’t apply is where Second Method and Loss applies. It is truly hard to imagine what must have been going through the head of ISDA’s crack drafting squad™ when it came up with this formulation, if it wasn’t purely to intimidate and ward off ISDA ingénues — it bears the hallmarks of a preoccupied mind: one going through a messy divorce, midlife crisis or religious revelation of some sort — but it bears repeating that there are some intuitions who still prefer the 1992 ISDA.

Duplication? What duplication? Ohhhh — that duplication.

The “except, so as to avoid duplication” coda looks to be a magnificent piece of discombobulation from our old friends in ISDA’s crack drafting squad™ — and in the final analysis, it is, but not for the reasons you think it first — because at first blush there doesn’t seem to be any risk of duplication: the excluded paragraphs all deal exclusively with ISDA Master Agreements where Market Quotation, and not Loss, applies. So this Loss definition seems entirely irrelevant ... until you notice that Settlement Amount used when valuing with Market Quotation — stay with me here — defaults to Loss[1] when, as most assuredly it will, Market Quotation turns out to be a totally impractical means of valuing a Terminated Transaction, since no-one will give you a price for a trade they can’t actually enter.

So, yes it is a piece of massive discombobulation, but for a deeper reason than appears at first — namely, that Market Quotation is waste of space anyway.

Whatever, it is simply magical that ISDA’s crack drafting squad™ saw fit to treat Loss, but not Market Quotation, as being converted into a Termination Currency Equivalent including Unpaid Amounts, especially as Loss is a fallback when Market Quotation fails to work, as inevitably it will.

  1. ↑ Loss not counting Unpaid Amounts, that is — makes you weep, doesn’t it?
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