Matching and Material adverse change: Difference between pages

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1. ''Investment management.''
(MAC).  


Arranging that in a portfolio of assets and liabilities the cash flows generated by the assets can be expected to meet the liability payouts either because:
A clause in a loan agreement.
:(1) the assets generate income of the right amount at the right time or
:(2) because the market values of the assets are linked to (positively correlated with) the market values of the liabilities.


Normally it is intended as a 'catch-all' clause and states that if ''in the opinion of the lender'' there is a change in the circumstances of the borrower that is both material and adverse, then this will constitute an event of default. 


2. ''Interest rate risk management.''


Equalising or approximating the modified duration of assets and liabilities in a portfolio, to manage interest rate risk.
Not surprisingly this is a contentious clause, depending on who determines 'material', and how.


 
Modified forms of the clause may require the opinion to be 'reasonable' or replace the 'opinion' with an objective test.
3. ''Interest rate risk management.''
 
Equalising or approximating both the modified duration and the modified convexity of assets and liabilities in a portfolio.
 
 
4. ''Financial reporting''
 
The Accruals concept in accounting.




== See also ==
== See also ==
* [[Accruals concept]]
* [[Conduct]]
* [[Convexity]]
* [[Event of default]]
* [[Correlation]]
* [[Loan agreement]]
* [[Diversification]]
* [[Material]]
* [[Duration]]
* [[Material adverse effect]]
* [[Financial reporting]]
* [[Materiality]]
* [[Financial statements]]
* [[Immunisation]]
* [[Interest rate risk]]
* [[Investment]]
* [[Modified convexity]]
* [[Modified duration]]
* [[Portfolio immunisation]]
* [[Risk management]]


[[Category:Manage_risks]]
[[Category:Long_term_funding]]
[[Category:Treasury_operations_infrastructure]]

Latest revision as of 10:32, 15 July 2021

(MAC).

A clause in a loan agreement.

Normally it is intended as a 'catch-all' clause and states that if in the opinion of the lender there is a change in the circumstances of the borrower that is both material and adverse, then this will constitute an event of default.


Not surprisingly this is a contentious clause, depending on who determines 'material', and how.

Modified forms of the clause may require the opinion to be 'reasonable' or replace the 'opinion' with an objective test.


See also