Credit Default Swaps: The Vanilla Essence
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Parties and key players
Parties and key players
Foreword
Preface
A credit default swap snapshot
Parties and key players
Documentation and standard trading conventions
Credit risk period, scheduled termination date and termination date
Fixed amounts, floating rate payer calculation amount and initial payment amount
Qualifying guarantee and qualifying affiliate guarantee
Reference obligation
Subordination and the senior non-preferred supplement
Outstanding principal balance and due and payable amount
Obligations and deliverable obligations
Credit event overview
Bankruptcy
Failure to pay
Repudiation/moratorium
Restructuring and redenomination
Governmental intervention and contingent convertible capital instruments
Successor determinations
Publicly available information and eligible information
Notices
Business day terms and timing rules
Event determination date and settlement methods
Auction settlement
Cash settlement
Physical settlement
Physical settlement fallback procedures
Orphaning
Fixed recovery transaction and reference obligation only trade
Novation and early termination
Economic sanctions: compliance challenges
Disclosures and regulations
Conclusion: at the ‘Exit Checkpoint’
Appendix
References
2.1 INTRODUCTION
This chapter introduces the parties associated with a transaction and the key players within the complexion of the credit derivatives industry. First, the parties to a transaction are described (including the calculation agent, and its determinations under the provisions of the 2014 ISDA Credit Derivatives Definitions (henceforth the “2014 Definitions”; see International Swaps and Derivatives Association Inc. 2014b). Then the chapter discusses the constitution of, and the role played by, the Credit Derivatives Determinations Committee (DC), the determination standard applicable to a DC, the procedure to convene the DC, the primary resolutions and the applicable voting thresholds for certain key resolutions of the DC. An overview of the external review procedure that may apply to a deliberation in cases where a DC has failed to reach a supermajority decision is also outlined. Finally, the roles played by ISDA, the DC Secretary, the auction administrators and the key infrastructure providers within the credit derivatives industry are also highlighted.
2.2 KEY PARTIES
Figure 2.1 gives an overview of the key entities and parties associated with the credit
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