Template:M summ 1992 ISDA Loss: Difference between revisions

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{{isda92prov|Loss}} is a means of valuing {{isda92prov|Transaction}}s 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.