All,
We are seeking clarification on how the Effective Date should be represented within the General Terms on a Credit Default Swap, especially post assignment/novation.
For example:
Trade with effective date of 16th December 2005:
<generalTerms>
<effectiveDate>
<unadjustedDate>2005-12-16</unadjustedDate>
<dateAdjustments>
<businessDayConvention>NONE</businessDayConvention>
<businessCenters>
<businessCenter>GBLO</businessCenter>
<businessCenter>EUTA</businessCenter>
</businessCenters>
</dateAdjustments>
</effectiveDate>
….
If the novation/assignment is effective on 15th December 2006, should the general terms be:
1) As before, with the Effective Date of 16th December 2005:
<generalTerms>
<effectiveDate>
<unadjustedDate>2005-12-16</unadjustedDate>
<dateAdjustments>
<businessDayConvention>NONE</businessDayConvention>
<businessCenters>
<businessCenter>GBLO</businessCenter>
<businessCenter>EUTA</businessCenter>
</businessCenters>
</dateAdjustments>
</effectiveDate>
...
OR
2) Should the Effective Date change to reflect the new assignment effective date:
<generalTerms>
<effectiveDate>
<unadjustedDate>2006-12-15</unadjustedDate>
<dateAdjustments>
<businessDayConvention>NONE</businessDayConvention>
<businessCenters>
<businessCenter>GBLO</businessCenter>
<businessCenter>EUTA</businessCenter>
</businessCenters>
</dateAdjustments>
</effectiveDate>
...
Currently our internal representation is in-line with 1), which assumes that the Fpml contains the contractual representation of the deal. We have modelled the assignment effective date within a life-cycle event node, outside of the "main" Fpml element.
Is that correct? Any help/guidance on this matter would be greatly appreciated.
Many Thanks
Jamie