Page 43 - PRIAA Glossary

a credit event has occurred. It should be noted that the delivery of the notice is a process to facilitate settlement and that delivery of the notice does not override fact or law. The CEN is typically coupled with a Notice of Publicly Available Information (NOPS).
CREDIT LINKED NOTE (CLN)
Equivalent to a funded credit derivative, a security that has an embedded credit default swap. It allows the issuer to transfer some of the credit risk to credit investors. The issuer is not obligated to repay the debt in the event of default. The coupon payable on the CLN reflects the credit quality of both the issuer and the underlying reference entity(s). CLNs mature below par if any of the underlying reference entities suffers a credit event during the life of the issuance.
CREDIT SUPPORT ANNEX (CSA)
An annex to the ISDA Master Agreement which contains
the agreed collateral terms between the parties. There are English law and New York law versions. Relevant terms contained in CSAs include thresholds, independent amounts and minimum transfer amounts.
CREDIT VALUATION (OR VALUE) ADJUSTMENT (CVA)
The difference between a portfolio valued without counterparty risk and a portfolio valued with counterparty risk. The equation for this can be seen below:
Credit Valuation Adjustment (CVA)
= (Expected Positive Exposure) *(Counterparty Default Probability) *(Counterparty Loss Given Default)
CROSS-BORDER OR EXTRATERRITORIALITY
A term used when a trade between two counterparties crosses the borders of two regulatory jurisdictions. This could, for example, be a trade between a European and US counterparty. In this case, the trade would apply to both the jurisdiction of the Commodity Futures Trading Commission (CFTC) and European Securities and Markets Authority (ESMA).
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