if threshold=10m & min. transfer=500t. if threshold is breached by 500t and the company posts the 500t (as its also the min. transfer). What happens if the company gains 300t (below the min. transfer) would 300t be returned from the posted 500t ?
Hi,
If suppose the new counterparty exposure after gain of 300t or .3mn as is 10.2mn then out of .5mn posted under min. Transfer amt the 300t gain can be recouped from counterparty i think(not sure as per my opinion),as mtm is 10.2 mn our new threshold is 10.7 mn as min transfer amt will add to current mtm value once again if total exposure exceeds 10.7 mn then min transger amt of .5 mn needs to be posted,10.7 becomes new mtm value and 10.7+.5=11.2 mn new threshold . So any gains can be used to recoup some min transfer amt adjusting the mkt value and the threshold.
Had we had not recouped our gains the mtm would be 10.5 mn and treshold of 11mn.
Thanks
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