Template:M summ 1995 CSA Independent Amount: Difference between revisions

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 If you look at it cold, the {{csaprov|Independent Amount}} as written in the {{csa}} looks like a fixed currency amount that is paid at the beginning of a relationship, irrespective of how many {{isdaprov|Transactions}} you may have on — even if you have ''none'' on. As conventionally understood, “[[initial margin]]” is, by contrast, {{isdaprov|Transaction}}-specific, being calculated by reference to the liquidity and volatility of the specific {{isdaprov|Transaction}} to which it relates.
-But the {{csa}} doesn’t have a concept of “[[initial margin]]”, and no-one in their right mind would send their swap dealer a wodge of money just to commemorate the signing of an {{isdama}}, exciting though that event may be. Perhaps {{icds}} of 1994 and 1995 lived in a kinder, more naïve time — one more impressionably swooned by the conclusion of a negotiation than our own — or maybe they were just blitzed when they came up with the idea. <ref>This isn’t an entirely outlandish speculation: how else can you rationalise their formulation of {{isdaprov|Indemnifiable Taxes}}, for example? It was the “naughty nineties”, after all.</ref>
+But the {{csa}} doesn’t have a concept of “[[initial margin]]”, and no-one in their right mind would send their swap dealer a wodge of money just to commemorate the signing of an {{isdama}}, exciting though that event may be. Perhaps {{icds}} of 1994 and 1995 lived in a kinder, more naïve time — one more impressionably swooned by the conclusion of a negotiation than our own — or maybe they were just blitzed when they came up with the idea.<ref>This isn’t an entirely outlandish speculation: how else can you rationalise their formulation of {{isdaprov|Indemnifiable Taxes}}, for example? It was the “naughty nineties”, after all.</ref>
-What the market has done is the bend the squad’s fantastical verbal engineering into something that ''works like'' {{isdaprov|Transaction}}-specific [[initial margin]]. So the {{isdaprov|Independent Amount}} will be usually defined as “an amount agreed between the parties in relation to each {{isdaprov|Transaction}}, or as otherwise advised by Party A”,<ref>Being the dealer, of course.</ref> which rather kicks the issue in to touch. In practice, it’s likely to be articulated as a multiplier on notional, will be required of the client by the [[swap dealer]] and not the other way around, will be payable at the start of each {{isdaprov|Transaction}}, and may be adjustable on the fly.
+In any case, what the market has done since the [[Children of the Forest]] first produced that nutty {{isdaprov|Independent Amount}} concept is to bend the squad’s fantastical verbal engineering so it ''works like'' {{isdaprov|Transaction}}-specific [[initial margin]]. So, the {{isdaprov|Independent Amount}} will be usually defined as “an amount agreed between the parties in relation to each {{isdaprov|Transaction}}, or as otherwise advised by Party A”,<ref>Being the dealer, of course.</ref> which rather kicks the issue in to touch. In practice, it’s likely to be articulated as a multiplier on notional, will be required of the client by the [[swap dealer]] and not the other way around, will be payable at the start of each {{isdaprov|Transaction}}, and may be adjustable on the fly.
 For example, a [[dealer]] who sets [[IA]] by reference to the perceived volatility of the {{isdaprov|Transaction}} might reserve the right to increase [[IA]] should that volatility unexpectedly change. You can be sure more than one risk officer embarked on an undignified scramble for {{sex|her}} margin tables — and put in a desperate call to [[Legal]] — the day UK decided [[Brexit means Brexit|Brexit meant what it said]] and [[sterling]] [[gapped]] down 8%.