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mark-to-market currency swap

A new article 10 was added to the 2006 definitions. The new article introduces the mechanics of a new  mark-to-market currency swap . The MTM currency swap is a swap transaction which allows the parties to reduce the credit exposure which arises as a result of fluctuation of exchange rate. The mark-to-market currency swap does this by adjusting the notional amount (the  Variable Currency Amount ) of one party (the  Variable Currency Payer ) during the term of the transaction whereas the notional amount (the "Constant Currency Amount") of the other party (the  Constant Currency Payer ) remains constant.

The Variable Currency Amount adjusted by reference to a Currency Exchange Rate, which is a rate agreed by the parties or determined by reference to the ISDA MTM Matrix (see below).

In addition, during the term of the transaction, the party will exchange a  MTM Amount (if any), which is the difference between the Variable Currency Amount of the current calculation period and previous calculation period.

The MTM Matrix

The MTM Matrix will be published by ISDA from time to time and will apply by default to a mark-to-market currency swap with a  Currency Pair unless the parties disapply the same.

Unless otherwise specified by the parties, the version published by ISDA on the trade date will apply.

confirmation template

A template of the confirmation is set out in Exhibit II-H of the 2006 definitions

derivativeslawyer.com

Last updated February 2007

The above notes are intended to highlight issues and provide only general outlines and not intended to be comprehensive nor legal advice. Where applicable, the same should be read in conjunction with, and are qualified in their entirety by, the full provisions of the relevant ISDA provisions and definitions. They shall never be used in place of professional advice. We accept no responsibility for any loss arising from any action taken or not taken by anyone using this material or using this material in conjunction with any ISDA documentation in reliance thereof. If you have any question, please contact us.

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The above notes are intended to highlight issues and provide only general outlines and not intended to be comprehensive nor legal advice. Where applicable, the same should be read in conjunction with, and are qualified in their entirety by, the full provisions of the relevant ISDA provisions and definitions. They shall never be used in place of professional advice. We accept no responsibility for any loss arising from any action taken or not taken by anyone using this material or using this material in conjunction with any ISDA documentation in reliance thereof. If you have any question, please contact us.

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