Derivatives · glossary
The Exposure a side may run before it must post cash: €500,000 for Atlas and €2,000,000 for the bank. It falls to zero while that side is in default. Do not confuse it with the Threshold Amount. Annex, paragraph 9 · Chapter 10
Explained in Chapter 10, Collateral: the Annex and the Call, of Derivatives.
The collateral annex has a second figure called a Threshold. It is not a trigger. It is the value in the bank’s favour that Atlas may run before it must post collateral. Four figures on this file sound alike, and a board paper must keep them apart…Read Chapter 8, The First Winter: Events of Default, Cross Default and the Two Hats →
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