Category Archives: ISDA

Basel III Counterparty Credit Metrics

 Basel III Counterparty Credit Metrics

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An important element of Basel III is the definition of minimum capital adequacy requirements for counterparty credit exposures (derivative instruments, long settlement transactions, securities financing transactions, and counterparty master agreements where the counterparty to the transaction is a credit-risky entity) held by banks.

Basel III defines two forms of capital adequacy requirements for counterparty credit exposures. The first form specifies the minimum capital required to cover potential future losses from counterparty defaults in terms of the probability of counterparty default (PD), the loss rate given default (LGD) on a defaulted exposure, the exposure at default (EAD) of the exposure, and the effective maturity (M) of the exposure. The second form specifies the minimum capital required to cover potential future losses from future changes in the credit quality of the counterparty that result in changes in the credit spreads for the counterparty’s credit exposures.

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IRD and CDS Weekly Analysis: week ending January 2, 2015

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Data from ISDA SwapsInfo for the week ending January 2, 2015.
Interest Rates Derivatives
• Overall rates trading was down 19% from the previous week
• 28% less volume was cleared, and 36% less was executed On SEF than in the previous week
• 72% of total notional was cleared this week, vs. 81% last week
• 49% of total notional was executed On SEF this week, vs. 62% last week

Go to the SwapsInfo IRD Price/Transaction page

 Credit Default Swaps
• Overall CDS notional amounts increased 44% from the previous week
• Notional cleared was up 60%, and 61% more was executed On SEF than in the previous week
• 89% of total notional was cleared this week, vs. 80% last week
• 81% of total notional was executed On SEF this week, vs. 72% last week

Go to the SwapsInfo CDS Price/Transaction page

Weekly On-SEF Notional

Data sourced from DTCC and Bloomberg SEF datasets accessed by ISDA SwapsInfo. Data in this analysis may differ from results on Previous-week data may vary from the last Weekly Analysis due to changes such as cancellations and corrections made to the datasets in the interim. ©2014 International Swaps and Derivatives Association, Inc.

Does Short selling ban effects CDS pricing, liquidity?

A new ISDA Research Note has been posted on

Adverse Liquidity Effects of the EU Uncovered Sovereign CDS Ban

On November 1, 2012, the provisions of the EU regulation which bans uncovered short-selling of sovereign (single name) CDS came into effect. Market   participants who wish to establish a permitted SCDS position must now hold offsetting risk, such as the underlying sovereign bond. This change raised   concerns about the impact on portfolio hedging, the potential for a reduction in SCDS liquidity and the implications of a reduction in the ECB’s bond-buying program. In this report, ISDA examines the liquidity impact of the regulation one year after implementation. Findings reveal that EU-regulated SCDS and sovereign indices experienced sharp volume and trade count declines. Additionally, proxy hedges were found to become less effective due to a correlation breakdown with European SCDS.

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