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Index
Cover
Title Page
Copyright
Dedication
Foreword
Acknowledgements
About the Author
Introduction
Part 1 Introductory Elements
Chapter 1 Fundamental Collateral Concepts
Chapter 2 The Nature and Characteristics of Collateral Types
2.1 Cash Collateral: Overview
2.2 Bond Collateral: Overview
Note
Part 2 Sale & Repurchase (Repo) Trades and Collateral
Chapter 3 Sale & Repurchase (Repo) Trades and Collateral – Introduction to Repo
3.1 Introduction to Repo
3.2 Participants in the Repo Marketplace
Chapter 4 Sale & Repurchase (Repo) Trades and Collateral – Classic Repo Trades
4.1 Cash-Based Classic Repo Transactions
Chapter 5 Sale & Repurchase (Repo) Trades and Collateral – The Repo Trade Lifecycle
Introduction
5.1 Pre-Trading
5.2 Trade Execution
5.3 Pre-Settlement
5.4 Settlement of Opening Leg
5.5 Throughout Lifetime of Trade
Evening of Thursday 8th June 2017
Morning of Friday 9th June 2017
Evening of Friday 9th June 2017
Morning of Monday 12th June 2017
Evening of Monday 12th June 2017
Morning of Tuesday 13th June 2017
5.6 Settlement of Closing Leg
Chapter 6 Sale & Repurchase (Repo) Trades and Collateral – Stock-Based Classic Repo Trades
Chapter 7 Sale & Repurchase (Repo) Trades and Collateral – Repo Trade Variations
7.1 Buy/Sell Backs (Overview)
7.2 Tri-Party Repo (Overview)
7.3 Delivery by Value (Overview)
7.4 Repo Central Clearing (Overview)
7.5 GC Pooling (Overview)
7.6 Repoclear (Overview)
Chapter 8 Sale & Repurchase (Repo) Trades and Collateral – The Global Master Repurchase Agreement
Part 3 Securities Lending & Borrowing and Collateral
Chapter 9 Securities Lending & Borrowing and Collateral – Introduction to SL&B
9.1 Introduction to Securities Lending
9.2 Introduction to Securities Borrowing
Chapter 10 Securities Lending & Borrowing and Collateral – Principles of SL&B
10.1 Principles of Securities Lending
10.2 Principles of Securities Borrowing
10.3 Lendable and Borrowable Assets
10.4 Participants in the Securities Lending & Borrowing Marketplace: Introduction
10.5 Securities Lending & Borrowing: Legal Documentation
10.6 Securities Lending & Borrowing and Collateral
10.7 Conclusion
Note
Chapter 11 Securities Lending & Borrowing and Collateral – The SL&B Trade Lifecycle
11.1 Pre- Trading
11.2 Trade Execution
11.3 Pre-Settlement
Trade Date: 28th October
11.4 Settlement of Opening Leg
Opening Value Date: 29th October
11.5 Throughout Lifetime of Trade
Opening Value Date +1: 30th October
Opening Value Date +2: 31st October
Opening Value Date +3: 1st November
Opening Value Date +4: 2nd November
11.6 Recall and Return of Securities
11.7 Settlement of Closing Leg
Closing Value Date: 3rd November
11.8 Settlement of Fees & Rebates
11.9 Additional Factors
Chapter 12 Securities Lending & Borrowing and Collateral – Accessing the SL&B Marketplace
12.1 Routes to Market
12.2 Collateral Management
Chapter 13 Securities Lending & Borrowing and Collateral – The Global Master Securities Lending Agreement
Part 4a OTC Derivatives and Collateral
Chapter 14 OTC Derivatives and Collateral – Transaction Types – Introduction
14.1 Exchange-Traded Derivatives
14.2 OTC Derivatives
14.3 Exchange-Traded Derivatives Versus OTC Derivatives: Summary
14.4 The Future of OTC Derivatives
Chapter 15 OTC Derivatives and Collateral – Transaction Types – Generic Structural Aspects
15.1 OTC Derivative Products
15.2 OTC Derivative Trades – Generic Trade Components and Subsequent Actions
15.3 OTC Derivatives: Trade Processing and Collateral Processing
15.4 OTC Derivatives: Exposure and Collateral Management
Chapter 16 OTC Derivatives and Collateral – Transaction Types – Interest Rate Swaps
16.1 Definition
16.2 Purpose
16.3 Trade Components
16.4 Interest Payment Calculation
16.5 IRS Operations Activity: Overview
16.6 IRS and Collateral Management
Chapter 17 OTC Derivatives and Collateral – Transaction Types – Credit Default Swaps
17.1 Definition
17.2 Purpose
17.3 Trade Components
17.4 Cost of Protection
17.5 Credit Events
17.6 CDS Operations Activity: Overview
17.7 Settlement Following Credit Events
17.8 The Protection Seller’s Risk
17.9 CDS and Collateral Management
17.10 CDS Variations
Chapter 18 OTC Derivatives and Collateral – Transaction Types – Foreign Exchange Swaps
18.1 Definition
18.2 Purpose
18.3 Trade Components
18.4 FXS Operations Activity: Overview
18.5 Foreign Exchange Swaps and Collateral Management
18.6 Foreign Exchange Swap Variations
Chapter 19 OTC Derivatives and Collateral – Transaction Types – Cross-Currency Swaps
19.1 Definition
19.2 Purpose
19.3 Trade Components
19.4 CCS Operations Activity: Overview
19.5 Cross-Currency Swaps and Collateral Management
19.6 Cross-Currency Swap Variations
Chapter 20 OTC Derivatives and Collateral – Legal Protection – Introduction
Note
Chapter 21 OTC Derivatives and Collateral – Legal Protection – Master Agreement and Schedule
21.1 Introduction
21.2 Content of the ISDA Master Agreement
21.3 Content of the Schedule to the Master Agreement
21.4 Negotiating and Signing the Document Framework
21.5 Trading Following Signing of Document Framework
21.6 Trade Confirmation
21.7 Summary
Chapter 22 OTC Derivatives and Collateral – Legal Protection – Credit Support Annex
22.1 Introduction
22.2 Signing of CSA and Trade Execution
22.3 New versus Old CSAs
22.4 OTC Derivative Exposures
22.5 CSA Legal Structures
22.6 Responsibilities Under the CSA: Overview
22.7 Day-to-Day Use of the CSA
22.8 CSA Components
22.9 Ownership of Collateral
22.10 Example Negotiated CSAs: Overview
22.11 Party Liquidation: Impact on Collateral
22.12 Conclusion
Chapter 23 OTC Derivatives and Collateral – Static Data
23.1 Introduction
23.2 Static Data and New OTC Derivative Trades
23.3 Static Data and Collateral Management
23.4 How Software Systems Hold Collateral-Related Static Data
23.5 Sources of Static Data
23.6 Setting Up of and Maintenance of Static Data
23.7 Conclusion
Note
Chapter 24 The OTC Derivative Collateral Lifecycle
24.1 The OTC Derivative Collateral Lifecycle – Introduction
Chapter 25 OTC Derivatives and Collateral – The Collateral Lifecycle – Pre-Trading – Legal Documentation
Chapter 26 OTC Derivatives and Collateral – The Collateral Lifecycle – Pre-Trading – Static Data
Chapter 27 OTC Derivatives and Collateral – The Collateral Lifecycle – Trading – Trade Execution
27.1 Trade Execution: Introduction
27.2 Trade Execution Methods
27.3 Trade Execution, Trade Processing and Collateral Processing
27.4 Trade Execution and Future Cashflow Discounting
27.5 Conclusion
Chapter 28 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Capture
28.1 Trade Capture: Introduction
28.2 Trade Capture within Separate Trading and Operations Systems
28.3 Trade Capture within a Single Trading and Operations System
28.4 Trade Reference Numbers
28.5 Trade Capture Error Identification
28.6 Trade Capture and Collateral Management
28.7 Conclusion
Note
Chapter 29 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade Confirmation/Affirmation
29.1 Trade Confirmation/Affirmation: Introduction
29.2 Trade Confirmation versus Trade Affirmation
29.3 Electronic Trade Confirmation/Affirmation
29.4 Conclusion
Chapter 30 OTC Derivatives and Collateral – The Collateral Lifecycle – Post-Trading – Trade/Portfolio Netting
30.1 Introduction
30.2 Benefits of Trade/Portfolio Netting (Portfolio Compression)
30.3 The Trade/Portfolio Netting (Portfolio Compression) Process
30.4 Internal Treatment of Netted (Compressed) Trades
30.5 The Future of Trade/Portfolio Netting (Portfolio Compression)
30.6 Conclusion
Chapter 31 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Portfolio Reconciliation
31.1 Introduction
31.2 Purpose of Portfolio Reconciliation
31.3 Reasons for Portfolio Discrepancies
31.4 Advantages and Disadvantages of Portfolio Reconciliation
31.5 The Portfolio Reconciliation Process
31.6 Conclusion
Note
Chapter 32 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Marking-to-Market
32.1 Introduction
32.2 Generic Marking-to-Market Principles
32.3 The Origin of Prices
32.4 Uses of Marking-to-Market
32.5 Trends in Marking-to-Market Frequency
Chapter 33 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Exposure Calculation
33.1 Introduction
33.2 Credit Support Annex
33.3 Determining Exposure Amounts and Direction
33.4 Cash Collateral versus Bond Collateral
33.5 Exposures on Individual Trades versus Portfolios
33.6 Conclusion
Chapter 34 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Receiving Margin Calls
34.1 Introduction
34.2 Incoming Margin Call: Both Cash and Securities Collateral
34.3 Incoming Margin Call: Cash Collateral
34.4 Incoming Margin Call: Securities Collateral
Determining Haircut Percentage: Example Calculations
34.5 Conclusion
Chapter 35 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Issuing Margin Calls
35.1 Introduction
35.2 Issuing a Margin Call Notification
35.3 Collateral Proposed by Counterparty
35.4 Verifying the Counterparty’s Proposed Collateral
35.5 Transaction Capture
35.6 Actioning Receipt of Incoming Collateral
35.7 Monitoring Receipt of Collateral
35.8 Updating Books & Records
35.9 Performing Reconciliation
35.10 Updating Records of Cumulative Collateral
35.11 Conclusion
Note
Chapter 36 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Holding Collateral
36.1 Introduction
36.2 Legal Structures Impacting the Holding of Collateral
36.3 Reuse and Rehypothecation of Collateral: Benefits and Risks
36.4 Holding Bond Collateral with Reuse and Rehypothecation Rights
36.5 Holding Bond Collateral without Rehypothecation Rights
36.6 Holding Collateral and Operational Control
36.7 Bond Collateral
36.8 Cash Collateral
36.9 Conclusion
Note
Chapter 37 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Introduction
Chapter 38 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Novation
38.1 Introduction
38.2 Reasons for Novation
38.3 Impact of Novation on Books & Records
38.4 Impact of Novation on Collateral Management
38.5 Conclusion
Chapter 39 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Unwind
39.1 Introduction
39.2 Reasons for Unwinding
39.3 Impact of Unwinding on Books & Records
39.4 Impact of Unwinding on Collateral Management
39.5 Conclusion
Chapter 40 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Offset
40.1 Introduction
40.2 Reasons for Offsetting
40.3 Impact of Offsetting on Books & Records
40.4 Impact of Offsetting on Collateral Management
40.5 Conclusion
Chapter 41 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Post-Trade Execution Events – Credit Events
41.1 Introduction
41.2 Impact of Credit Events on Books & Records
41.3 Impact of Credit Events on Collateral Management
41.4 Conclusion
Chapter 42 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Collateral Substitution
42.1 Introduction
42.2 Reasons for Collateral Substitution
42.3 The Process of Collateral Substitution
42.4 Risks in Settlement of Collateral Substitution
42.5 Urgency of Collateral Substitution
42.6 Impact of Collateral Substitution on the Collateral Taker
42.7 Unwanted Exposures in Collateral Substitution
42.8 Updating Books & Records
42.9 Conclusion
Chapter 43 OTC Derivatives and Collateral – The Collateral Lifecycle – Throughout Lifetime of Trade – Income & Corporate Action Events
43.1 Introduction
43.2 Bond Collateral and Coupon Payments
43.2.1 Collateral Taker Holds the Collateral
43.2.2 Collateral Taker Reuses or Rehypothecates the Collateral
43.3 Bond Collateral and Corporate Actions
43.4 Conclusion
Chapter 44 OTC Derivatives and Collateral – The Collateral Lifecycle – Trade Termination – Trade Termination
Part 4b OTC Derivatives and Collateral – Legal Documentation
Chapter 45 OTC Derivatives and Collateral – Legal Documentation
Part 4c OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral
Chapter 46 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Introduction
46.1 Introduction
46.2 The Need for Regulatory Change
46.3 Regulatory Changes: Introduction
46.4 Exchanges and Electronic Trading Platforms: Overview
46.5 Central Clearing: Overview
46.6 Trade Repositories: Introduction
46.7 Centrally Cleared and Non-Centrally Cleared Trades
Chapter 47 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Centrally Cleared Trades
47.1 Introduction
47.2 Fundamental Central Counterparty Concepts
47.3 Central Counterparty Operation and Services
47.4 Central Clearing: Advantages & Disadvantages
47.5 Central Counterparty Membership and Non-Membership
47.6 Clearing Member Margin Requirements
47.7 Initial Margin and Variation Margin: Impact on Sell-Side and Buy-Side Firms
47.8 Clearing Member Requirements: Overview
47.9 Clearing Members and their Clients: Account Structures
47.10 The Clearing Obligation
47.11 Treatment of Legacy Trades
47.12 Central Counterparties and Interoperability
47.13 Product, Party and Trade-Related Static Data
47.14 Operational Implications of Central Clearing: Overview
47.15 Legal Documentation: Overview
47.16 Status of Individual Central Counterparties
47.17 Central Clearing and the OTC Derivative Collateral Lifecycle
47.18 Collateral Transformation
Chapter 48 OTC Derivatives and Collateral – Regulatory Change and the Future of Collateral – Non-Centrally Cleared Trades
48.1 Introduction
48.2 Reasons for the Existence of Non-Centrally Cleared Trades
48.3 Market Participants Executing Non-Centrally Cleared Trades
48.4 Non-Centrally Cleared Trades: Margin Regulations
48.5 Non-Centrally Cleared Trades: Legal Documentation
48.6 Non-Centrally Cleared Trades: Further Risk Mitigation Regulations
48.7 Non-Centrally Cleared Trades: Trade Reporting Regulations
Note
Glossary of Terms
Useful Websites
Further Reading
Index
End User License Agreement
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