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- Product code: 18925
- ISBN: 0273659243,
ISBN13: 9780273659242,
608 pages, paperback
Published by FT Prentice Hall on 2002
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Description of Mastering Collateral Management and Documentation |
In response to the continuing and growing use of collateral by banks and other financial institutions, this is the first comprehensive book on the subject. This practical guide provides negotiators with a clear, concise explanation of the topic, from an operational perspective and with particular focus on the five ISDA Credit Support Documents. Collateral is now big business. In January 2001 the International Swaps and Derivatives Association, Inc. (ISDA) calculated that between US$175-200 billion was pledged as collateral to protect credit exposure in the derivatives market. The authors estimate that 20-25% of interest rate and currency swap trades are now covered by collateral. This book describes collateral documentation in jargon-free, concise terms making it the must have book for all junior and experienced negotiators in this field.
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Contents of Mastering Collateral Management and Documentation |
1- Introduction
History of Collateral in Europe and the USA
Application of collateral to derivatives exposure
Early collateral management systems
Need for standardised documentation
Documentation in the market today
2- Collateral Management from a European perspective
How exposure and collateral are monitored
Important matters for collateral managers to know and establish:
- scope of derivatives products to be collateralised.
- types of eligible collateral.
- frequency of marking to market and collateral valuation.
- Thresholds
- Initial margin
- Haircuts
- Minimum Transfer Amounts
- Top-up collateral
- Re-use of collateral
- Excess collateral
- Substitution of collateral
- Interest payable on cash collateral
- Dispute procedures
- Reconciliation of collateral at regular intervals
- What happens in a collateral default
- Management of interest and income payments on collateral
- Co-ordination of collateralisation through various branches and how to achieve a global picture
Screen examples to illustrate how a collateral call is made
3- Legal issues relating to collateral from the European and US perspective
Security interest and title transfer routes
Recharacterisation Risk
Enforceability
Diversity of laws in Europe affecting collateral perfection and enforceability
The draft EU Directive on Collateral
The US legal perspective on collateral
The ISDA Collateral legal opinions
Collateral held in central security depository systems (e.g. Euroclear, Clearstream and BONY) and the rights of parties
4- Credit issues relating to collateral
Permissible types of collateral
Haircut methodology
Concentration risk
Correlation risk
Market risk
Liquidity risk
Documentation risk
5- The ISDA Credit Support Documents
The English Law ISDA Credit Support Annex
The New York Law ISDA Credit Support Annex
Differences between the New York Credit Support Annex and the English Law Credit Support Annex
The English Law Credit Support Deed
Summary treatment - The Japanese Law Credit Support Annex
Summary treatment - The ISDA 2001 Margin Provisions
6- New developments
Annexes
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About Paul Harding and Christian Johnson |
Paul Harding is Managing Director of Derivatives Documentation Ltd, a derivatives consultancy and project management company based in the City of London. Its clients include many of the world's leading banks. Christian Johnson is an associate professor based at Loyola University Chicago School of Law.
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