What Are the Implications of a "Zero Threshold" in a CSA? ▴ Learn

What Are the Implications of a “Zero Threshold” in a CSA?

A "zero threshold" in a Credit Support Annex (CSA) means that the counterparty must post collateral for any non-zero mark-to-market exposure immediately. It eliminates the initial uncollateralized exposure limit, significantly reducing credit risk.

However, it increases the operational burden of managing frequent, small margin calls and necessitates a highly efficient collateral management system.

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