What is eligible credit support?


What is eligible credit support?

Eligible Credit Support means, in respect of a Counterparty, cash and negotiable obligations, in each case denominated in an Eligible Currency, provided that securities used as Eligible Credit Support are not originated by or serviced by the Counterparty. Eligible Credit Support .

How does credit support annex work?

A Credit Support Annex, or CSA, is a legal document which regulates credit support (collateral) for derivative transactions. The Credit Support Amount is the Secured Party’s Exposure plus Pledgor’s Independent Amounts minus Secured Party’s Independent Amounts minus the Pledgor’s Threshold.

Is a credit support annex a Credit Support document?

It is a Credit Support Document under the ISDA Master Agreement to which it relates. The Annex is an annex to the ISDA Master Agreement, relying for its effectiveness principally upon the netting provisions of the ISDA Master Agreement.

What is Net independent collateral amount?

Net independent Collateral amount (NICA) NICA describes the amount of collateral that a bank may use to offset its exposure on the default of the counterparty.

How is credit support amount calculated?

Credit Support Amount means, with respect to a Transferor on a Valuation Date, (i) the Transferee’s Exposure plus (ii) all Independent Amounts applicable to the Transferor, if any, minus (iii) all Independent Amounts applicable to the Transferee, if any, minus (iv) the Transferor’s Threshold; provided, however, that …

What is credit support balance?

Credit Support Balance means the value of all eligible credit support that has been transferred by the Swap Counterparty to the Issuer and that has not been returned to the Swap Counterparty, in each case pursuant to the terms of the Swap Agreement.

What is derivative collateral?

Derivatives Collateral means Assets of the Fund which have been pledged as collateral to a counterparty to secure the Fund’s obligations to such counterparty in connection with a Permitted Derivatives Transaction.

What do you know about collateral?

The term collateral refers to an asset that a lender accepts as security for a loan. That is, if the borrower defaults on their loan payments, the lender can seize the collateral and sell it to recoup some or all of its losses.

What is collateral in OTC derivatives?

What is ‘collateral’? Introducing collateral management as a process will mitigate counterparty credit risk, increasing volumes in high risk trades like OTC derivatives and structured products. Based on the daily exposure calculated, counterparties in OTC markets will exchange collateral to mitigate risk of default.

What is threshold collateral management?

Threshold Amount: This is a specified amount of the open exposure that the collateral provider is not required to secure through posting collateral. It’s an unsecured exposure that a party will take against a counterparty.

What is credit support annex for variation margin?

The 2016 Credit Support Annex for Variation Margin (VM) is an updated version of the 1995 ISDA Credit Support Annex (Title Transfer – English Law) that is limited to variation margin, and allows parties to establish variation margin arrangements that meet the requirements of new regulations on margin for uncleared …

What is collateral call?

Collateral Call means a notice to a Participant that additional Collateral, or possibly early payment, is required in order to remain in, or to regain, compliance with Tariff, Attachment Q.

What is the difference between eligible collateral and eligible credit support?

“Eligible Collateral” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. “Eligible Credit Support” means Eligible Collateral and Other Eligible Support.

What does a credit support annex ( CSA ) mean?

A credit support annex (CSA) is a document that defines the terms for the provision of collateral by the parties in derivatives transactions.

Is the annex a part of the schedule?

This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows: Paragraph 1. Interpretation Definitions and Inconsistency.

Why do traders use collateral as credit support?

Because of the high risk of losses on both sides, derivatives traders generally provide collateral as credit support for their trades. That is, each party sets aside collateral as a guarantee that it can meet any losses.


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