Credit Default Swaps: The Vanilla Essence
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Business day terms and timing rules
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
20.1 INTRODUCTION
This chapter provides a description of the concepts of “business day” and “business day convention”, and also explores other business day terms that are used within the 2014 ISDA Credit Derivatives Definitions (henceforth the “2014 Definitions”; see International Swaps and Derivatives Association Inc. 2014b), such as “calculation agent city business day” and “relevant city business day”. The chapter begins with a brief description of the relevance of “business day” and “business day convention” under the terms of the 2014 Definitions. An explanation of the definition of “business day”, and “business day convention” is subsequently provided. The chapter also demonstrates how a transaction can be structured in such a way that different “business day(s)” are applied for different aspects of a transaction. In the concluding section, the “Event Timing Rule” and the “Payment Timing Rule” are elaborated using historical deliberations of the DC as illustrations to describe the operation of these rules in practice.
20.2 BUSINESS DAY
“Business day”, as defined in Panel 20.1, is an important concept within the terms of a transaction, as it relates to the timing
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