Credit risk period, scheduled termination date and termination date

Indra Rajaratnam

4.1 INTRODUCTION

This chapter first defines the credit risk period applicable to a transaction and clarifies the importance of such a period in the context of credit event settlements. The chapter then illustrates that settlement risk is still present after the expiry of the credit risk period. The concept and relevance of the scheduled termination date, and the events that give rise to a termination date are also described at the end of the chapter.

4.2 CREDIT RISK PERIOD

A DC credit event announcement and a credit event notice that needs to be delivered for a bilateral trigger of a credit event both relate to credit events which occur on or after the credit event backstop date, and on or prior to the extension date.11 See Sections 1.28 and 1.32 of the 2014 Definitions. Thus, these two dates are integral to the determination of the credit risk period for a particular transaction, and are depicted in Figure 4.1.

The credit risk period timeline demonstrated in Figure 4.1 reflects the window within which a credit event must occur for the event to form a credit event that could give rise to settlement under a transaction (the “credit risk period”). In this regard, the

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