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Undead ISDA: Difference between revisions
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{{a|isda|[[File:William Blake - The Day of Judgment.jpg|450px|thumb|center|Uh-oh: honey — did I check the residual {{isdaprov|Cross Default}} risk on that old [[87 ISDA]]?]]}}The status of every defunct [[ISDA]] master agreement, once all transactions have terminated, whether through the exigencies of a stressed [[close-out]], or simply through the [[entropy]] and general lassitude of a modern life in which many former devotees of the ISDA creed grew bored, or adversely regulated, and gave up on swaps, letting the last remaining {{isdaprov|Transaction}}s to roll off and scamper, free, into the fragrant meadows of oblivion. | {{a|isda|[[File:William Blake - The Day of Judgment.jpg|450px|thumb|center|Uh-oh: honey — did I check the residual {{isdaprov|Cross Default}} risk on that old [[87 ISDA]]?]]}}The status of every defunct [[ISDA]] master agreement, once all transactions have terminated, whether through the exigencies of a stressed [[close-out]], or simply through the [[entropy]] and general lassitude of a modern life in which many former devotees of the ISDA creed grew bored, or adversely regulated, and gave up on swaps, letting the last remaining {{isdaprov|Transaction}}s to roll off and scamper, free, into the fragrant meadows of oblivion. | ||
For while you can terminate a ''{{isdaprov|Transaction}}'' under an {{isdama}} the | For while you can terminate a ''{{isdaprov|Transaction}}'' under an {{isdama}}, none of its printed forms envisages the parties terminating the [[master agreement]] ''itself''.<ref>There are reasons for this, but they are [[tedious]]: If you terminate the whole agreement, not just the {{isdaprov|Transaction}}s under it, then how are all those clever [[close out]] mechanics meant to work?</ref> It has no general [[no-fault termination]] provisions so, unless you and your counterparty confect to agree one — for that you will need communion wine, garlic, wooden stakes and so on — a discarded ISDA arrangement will just ''lie there'', locked-in, mute, transfixed, plastered to the infinite like some ghostly apparition, frozen at the [[event horizon]] of a [[black hole]] for ever — surviving, indefinitely, some believe even beyond the expiry of the very entities whose trading relationship it once described. | ||
Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant {{isdaprov|Transaction}}s carries no financial obligations and presents no risk. If no {{isdaprov|Transactions}} remain that can [[close out]], what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged {{isdaprov|Cross Default}} clause... ''could it'' ... ? | Some would say this is a non-point, as un-alive as the ISDA that presents it. For an ISDA under which there are no extant {{isdaprov|Transaction}}s carries no financial obligations and presents no risk. If no {{isdaprov|Transactions}} remain that can [[close out]], what earthly concern is it of either counterparty if there are notional obligations going unfulfulled? Who will take the point that you are no longer fulfilling your coverant to send your annual report within three months of its publication? Only a person yet to meet an internal auditor could ask that question. and besides, what of those meta-obligations? That two-edged {{isdaprov|Cross Default}} clause... ''could it'' ... ? | ||
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*The [[Good Man]] | *The [[Good Man]] | ||
*The [[Dark Lord of the Swaps]] | *The [[Dark Lord of the Swaps]] | ||
{{ref}} | |||