Template:M summ 1995 CSA Credit Support Balance
The Credit Support Balance is an important part of the recipe when cooking up a Delivery Amount or Return Amount, because it is essentially the amount of credit support you have already posted. The transfer will, therefore, be your Credit Support Amount/Exposure less that sum.
In its own special way it is also a little impish, because it comes and goes depending on how you are doing. If you are doing really well (here’s hoping!) it will be your counterparty’s Credit Support Balance, and you won’t have one.[1] This means, if all the Transactions were terminated and the counterparty settled them in full, you would have to give that Credit Support Balance back. But the moment your luck turns, you don’t have a {Credit Support Balance any more, but your counterparty does. This is all quite hard to explain elegantly, so ISDA’s crack drafting squad™ doesn’t really try, but the unusual nature of a swap as a bilateral agreement is really the problem.
Note that Interest Amounts and Distributions, as long as they (i) have not yet been returned to the Transferor and (ii) are Eligible Credit Support, are included in the Credit Support Balance. Needless to say, amounts that are not Eligible Credit Support aren’t counted towards the Credit Support Balance but an amount due by Transferee to Transferor which would be Unpaid Amounts on an Event of Default etc, and for which Transferor would be an unsecured creditor.
Note, per the definition of Value, “items that are comprised in a Credit Support Balance and are not Eligible Credit Support” are valued at zero.
- ↑ Especially if we are on a 2016 VM CSA. If Independent Amounts are involved it is all a bit more confusing, because you may be net in the money, but you have still got a Credit Support Balance.