What is independent amount in finance?
The amount of collateral required over and above the mark to market of a portfolio. It is designed to cater for changes in the market value of a portfolio between margin calls.
What is threshold amount in CSA?
Threshold amount (TH): It is the level of unsecured exposure each counterparty will allow the other before any margin call is made. f. Minimum Transfer Amount (MTA): The minimum amount that can be transferred for any margin call. The amount is specified in the margining agreement.
How does ISDA CSA work?
A Credit Support Annex, or CSA, is a legal document which regulates credit support (collateral) for derivative transactions. It is one of the four parts that make up an ISDA Master Agreement but is not mandatory. There are also rules for the settlement of disputes arising over valuation of derivative positions.
What is CSA margin?
A credit support annex (CSA) is a document that defines the terms for the provision of collateral by the parties in derivatives transactions. It is one of four parts of a standard contract or master agreement developed by the International Swaps and Derivatives Association (ISDA).
Is independent amount the same as initial margin?
Independent Amount is the same concept as initial margin except that the term in- dependent amount only applies to uncleared OTC swaps that are collateralized and initial margin applies to derivatives of all types that are cleared.
What does Rehypothecation mean in finance?
Rehypothecation is a practice whereby banks and brokers use, for their own purposes, assets that have been posted as collateral by their clients. Clients who permit rehypothecation of their collateral may be compensated either through a lower cost of borrowing or a rebate on fees.
What is the minimum transfer amount?
Minimum Transfer Amount or “MTA”: This is really an operational measure, to avoid the hassle of transferring trivial amounts where the Exposure hasn’t changed a great deal overnight. So the Minimum Transfer Amount is simply the smallest amount you have to be bothered transferring over.
What is CSA risk?
A credit support annex is a legal document regulating the terms and conditions under which collateral is posted to mitigate counterparty credit risk in bilateral derivatives transactions. It is a voluntary annex within the International Swaps and Derivatives Association Master Agreement.
Is a CSA a Credit Support Document?
Note that a CSA is not a Credit Support Document, and you should not list it as one in Part 4 of the Schedule, however satisfying it might be to do so.
Why ISDA is required?
Banks and other corporations around the world use ISDA Master Agreements. The ISDA Master Agreement also makes transaction closeout and netting easier, as it bridges the gap between various standards used in different jurisdictions. Banks require corporate counterparties to sign an agreement to enter into swaps.
What is Reg initial margin?
Initial margin is the percentage of the purchase price of a security that must be covered by cash or collateral when using a margin account. The current initial margin requirement set by the Federal Reserve Board’s Regulation T is 50%.
What is variation margin?
The variation margin is a variable margin payment made by clearing members, such as a futures broker, to their respective clearing houses based on adverse price movements of the futures contracts these members hold.
When to use independent amounts under a CSA?
An Independent Amount overcollateralises OTC derivatives risk exposure. It can be taken to cover: in relation to credit concerns relating to one or both parties where there would be linkage to a credit rating table or net asset value.
What does CSA stand for in Isda terms?
CSA actually stands for Credit Support Annex, which is an Annex to your ISDA agreement with your trading counterpart that governs how your derivative trade is collaterallized (or not). Without the CSA agreement, the trade will get priced at the highest level of counterparty risk and the CSA charge will be significant.
What does CSA discounting mean in Credit Support Annex?
“CSA discounting” does not give you a lot of information: it just means the collateralisation of the trade follows the rules agreed upon between both parties in the Credit Support Annex.
When to use fixed money sums in CSA?
in relation to credit concerns relating to one or both parties where there would be linkage to a credit rating table or net asset value. It can be a fixed money sum or be expressed as a formula (e.g. as a percentage of a Transaction’s notional amount) or based upon low credit ratings or net asset value.