Credit Default Swaps: The Vanilla Essence
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Repudiation/moratorium
Repudiation/moratorium
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
14.1 INTRODUCTION
This chapter provides insight into the conditions that need to be satisfied for a repudiation/moratorium to arise. This credit event applies to all sovereign and some emerging market corporate transaction types under the standard trading conventions set out in the Matrix (International Swaps and Derivatives Association Inc. 2022a), as described in Table 3.1. The chapter begins with an overview of this two-tier credit event, and then discusses the component conditions of a repudiation/moratorium, including the requirements of the repudiation/moratorium extension condition. A practical application of the relevant determination principles related to this credit event is also illustrated in the context of the Republic of Ukraine Deliberation (Repudiation/Moratorium) and by reference to some historical deliberations. The applicable event determination date that would apply when a repudiation/moratorium occurs is also covered. At the end of the chapter, an overview of the principles relevant to a determination of a repudiation/moratorium is presented via use of a decision tree as a checklist.
14.2 TWO-TIER CREDIT EVENT
The repudiation/moratorium credit event is
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