Basis Risk Sample Clauses

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Basis Risk. Originates when an underlying asset and the method used to hedge that asset do not have perfectly correlated price movements. In grain markets, this is typically a result of physical ownership of grain, and a commodity derivative hedge on a futures exchange. Basis risk then often arises due to the physical grain and the hedging instrument having different characteristics i.e. quality, location, currency of value etc. CBH Grain manages basis risk using the same overarching principles by which it manages commodity price risk and foreign exchange risk. The key factor however, is to execute the physical sales strategy which involves systematically selling down the physical ownership of the Pool over time. At all times, the Pool will operate with the prescribed physical sales mandate, which is designed to reduce exposure to basis risk over time.
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Basis Risk. The effectiveness of any hedging strategy is dependent upon the matching of the risks being hedged with the instruments and strategies used to mitigate such risks, creating a corresponding offsetting position. “Basis risk” is the risk of loss resulting from a hedging transaction that is imperfectly matched or correlated to the subject risk exposure. The Investment Manager will continuously monitor the Companies’ hedging transactions to ensure that they continue to be effective. Should the effectiveness of the hedge position shift significantly the Investment Manager will seek to either modify or terminate the transaction. The foregoing concept can also apply to replication transactions, where basis risk can exist between the subject derivative transaction and the asset/assets intended to be replicated.
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Basis Risk. The risk of receiving insufficient receipts from the variable receipt component of a synthetic fixed-rate swap to pay the interest due on the underlying variable-rate debt issued by the State. Mitigation - The State will consider the potential savings and risk of different indices. • Termination Risk - The risk that a swap could be terminated and a market based termination payment would be required from the State due to any of several events, which may include ratings downgrade, covenant violations, swap or bond payment defaults. Mitigation - Progressive collateralization and budgeting of potential termination payments as conditions increase the possibility of a termination payment. Generally, the State needs to integrate swaps with bonds for tax purposes so that bond proceeds can be used for termination payments. Endeavor to incorporate in swap documentation nonparallel downgrade provisions benefiting the State. For example, if a termination is the result of a ratings downgrade of the counterparty, Maryland would not be required to make a termination payment. • Amortization Risk - The risk that the notional value of a swap contract could become mismatched versus the amortization of a particular series of fixed or variable rate bonds to which the swap is allocated. Mitigation - Match swap amortization with the amortization schedule of associated debt. • Operational Risk - the risk that the State or the counterparty may not have the adequate systems, policies, or practices to ensure timely and accurate cash flow exchanges and compliance with collateral provisions. Mitigation - Continue to develop and test policies and practices to ensure timely compliance by the State Treasurer’s Office with applicable swap agreement provisions. Ensure that there is sufficient staff for these responsibilities and that they have adequate experience and continuing training. Consult with Financial Advisor and/or Swap Advisor before entering any derivative contract. Invest in and update technology necessary to monitor these agreements. Implement an ongoing monitoring and reporting program for all derivative agreements.
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Related to Basis Risk

  • Basis Risk Reserve Fund (a) On the Closing Date, the Trustee shall establish and maintain in its name, in trust for the benefit of the Holders of the Certificates, the Basis Risk Reserve Fund. The Basis Risk Reserve Fund shall be an Eligible Account, and funds on deposit therein shall be held separate and apart from, and shall not be commingled with, any other moneys, including without limitation, other moneys held by the Trustee pursuant to this Agreement. (b) On the Closing Date, $5,000.00 will be deposited by the Depositor into the Basis Risk Reserve Fund. On each Distribution Date, the Trustee shall transfer from the Certificate Account to the Basis Risk Reserve Fund pursuant to Section 4.02(e)(xiii) the Required Basis Risk Reserve Fund Deposit. Amounts on deposit in the Basis Risk Reserve Fund shall be withdrawn by the Trustee in connection with any Distribution Date to fund the amounts required to be distributed to holders of the LIBOR Certificates in respect of Basis Risk Shortfalls. Any distributions of Monthly Excess Cashflow to the holders of the LIBOR Certificates pursuant to Sections 4.02(e)(xiii)(A)-(L) shall be deemed to have been deposited in the Basis Risk Reserve Fund and paid to such holders. On any Distribution Date, any amounts on deposit in the Basis Risk Reserve Fund in excess of the Required Basis Risk Reserve Fund Amount shall be distributed to the Class X Certificateholder pursuant to Section 4.02(e)(xv). (c) Funds in the Basis Risk Reserve Fund may be invested in Eligible Investments by the Trustee at the direction of the holders of the Class X Certificates maturing on or prior to the next succeeding Distribution Date. Any net investment earnings on such amounts shall be payable to the holders of the Class X Certificates. The Trustee shall account for the Basis Risk Reserve Fund as an outside reserve fund within the meaning of Treasury regulation 1.860G-2(h) and not an asset of any REMIC created pursuant to this Agreement. The Class X Certificates shall evidence ownership of the Basis Risk Reserve Fund for federal tax purposes and the Holders thereof shall direct the Trustee in writing as to the investment of amounts therein. The Trustee shall treat amounts transferred by the Master REMIC to the Basis Risk Reserve Fund as distributions to the Class X Certificateholder for all federal tax purposes. In the absence of such written direction, all funds in the Basis Risk Reserve Fund shall remain uninvested. The Trustee shall have no liability for losses on investments in Eligible Investments made pursuant to this Section 4.06(c) (other than as obligor on any such investments). Upon termination of the Trust Fund, any amounts remaining in the Basis Risk Reserve Fund shall be distributed to the Holders of the Class X Certificates in the same manner as if distributed pursuant to Section 4.02(e)(xv) hereof. (d) On the Distribution Date immediately after the Distribution Date on which the aggregate Class Principal Balance of the LIBOR Certificates equals zero, any amounts on deposit in the Basis Risk Reserve Fund not payable on the LIBOR Certificates shall be deposited into the Certificate Account and distributed to the Holders of the Class X Certificates in the same manner as if distributed pursuant to Section 4.02(e)(xv) hereof.

  • Carryover Notwithstanding any other provision of this Section 6, no adjustment shall be made to the number of shares of Common Stock to be delivered to the Warrantholder (or to the Exercise Price) if such adjustment represents less than 1% of the number of shares to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered.

  • Senior Certificates The Class 1-A-1, Class 1-A-2, Class 1-A-3, Class 1-X-1, Class 1-X-2, Class 1-X-3 and Class A-R Certificates.

  • Shortfalls (i) If the amounts described in Section 2.3 are insufficient to pay the Class A Monthly Interest on any Distribution Date, payments of interest to the Class A Noteholders will be reduced on a pro rata basis by the amount of such deficiency. The aggregate amount, if any, of such deficiency on any Distribution Date, together with the aggregate unpaid amount of any such deficiencies with respect to all prior Distribution Dates, shall be referred to as the “Class A Shortfall”. Interest shall accrue on the Class A Shortfall at the Class A Note Rate.

  • Net WAC Rate Carryover Reserve Account No later than the Closing Date, the Trust Administrator shall establish and maintain with itself a separate, segregated trust account titled, “Net WAC Rate Carryover Reserve Account, Deutsche Bank National Trust Company, as Trustee, in trust for registered Holders of Soundview Mortgage Loan Trust 2006-EQ2, Asset-Backed Certificates, Series 2006-EQ2.” All amounts deposited in the Net WAC Rate Carryover Reserve Account shall be distributed to the Holders of the Floating Rate Certificates in the manner set forth in Section 4.01(d). On each Distribution Date as to which there is a Net WAC Rate Carryover Amount payable to the Floating Rate Certificates (after taking into account the remaining Initial Net WAC Rate Carryover Reserve Account Deposit), the Trust Administrator has been directed by the Class C Certificateholders to, and therefore will, deposit into the Net WAC Rate Carryover Reserve Account the amounts described in Section 4.01(c)(v), rather than distributing such amounts to the Class C Certificateholders. In addition, any payments received by the Trust Administrator under the Basis Risk Cap Agreement on each Distribution Date will be deposited into the Net WAC Rate Carryover Reserve Account. On each such Distribution Date, the Trust Administrator shall hold all such amounts for the benefit of the Holders of the Floating Rate Certificates, and will distribute such amounts to the Holders of the Floating Rate Certificates in the amounts and priorities set forth in Section 4.01(d). On each Distribution Date, any amounts remaining in the Net WAC Rate Carryover Reserve Account (representing payments received by the Trust Administrator under the Basis Risk Cap Agreement) after the payment of any Net WAC Rate Carryover Amounts on the Floating Rate Certificates for such Distribution Date, shall be payable to the Trust Administrator as additional compensation. For so long as any Floating Rate Certificates are beneficially owned by the Depositor or any of its Affiliates, the Depositor shall refund or cause such Affiliate to refund any amounts paid to it under the Basis Risk Cap Agreement to the Trust Administrator who shall, pursuant to the terms of the Basis Risk Cap Agreement, return such amount to the counterparty thereunder. It is the intention of the parties hereto that, for federal and state income and state and local franchise tax purposes, the Net WAC Rate Carryover Reserve Account be disregarded as an entity separate from the Holder of the Class C Certificates unless and until the date when either (a) there is more than one Class C Certificateholder or (b) any Class of Certificates in addition to the Class C Certificates is recharacterized as an equity interest in the Net WAC Rate Carryover Reserve Account for federal income tax purposes, in which case it is the intention of the parties hereto that, for federal and state income and state and local franchise tax purposes, the Net WAC Rate Carryover Reserve Account be treated as a partnership provided, that the Trust Administrator shall not be required to prepare and file partnership tax returns in respect of such partnership unless it receives additional reasonable compensation (not to exceed $10,000 per year) for the preparation of such filings, written notification recognizing the creation of a partnership agreement or comparable documentation evidencing the partnership, if any. All amounts deposited into the Net WAC Rate Carryover Reserve Account (other than amounts received under the Basis Risk Cap Agreement) shall be treated as amounts distributed by REMIC 4 to the Holder of the Class C Interest and by REMIC 4 to the Holder of the Class C Certificates. The Net WAC Rate Carryover Reserve Account will be an “outside reserve fund” within the meaning of Treasury Regulation Section 1.860G-2(h). Upon the termination of the Trust, or the payment in full of the Floating Rate Certificates, all amounts remaining on deposit in the Net WAC Rate Carryover Reserve Account will be released by the Trust and distributed to the Holders of the Class C Certificates or their designee. The Net WAC Rate Carryover Reserve Account will be part of the Trust but not part of any REMIC and any payments to the Holders of the Floating Rate Certificates of Net WAC Rate Carryover Amounts will not be payments with respect to a “regular interest” in a REMIC within the meaning of Code Section 860(G)(a)(1). By accepting a Class C Certificate, each Class C Certificateholder hereby agrees to direct the Trust Administrator, and the Trust Administrator hereby is directed, to deposit into the Net WAC Rate Carryover Reserve Account the amounts described above on each Distribution Date as to which there is any Net WAC Rate Carryover Amount rather than distributing such amounts to the Class C Certificateholders. By accepting a Class C Certificate, each Class C Certificateholder further agrees that such direction is given for good and valuable consideration, the receipt and sufficiency of which is acknowledged by such acceptance. Amounts on deposit in the Net WAC Rate Carryover Reserve Account shall remain uninvested. For federal tax return and information reporting, the right of the Holders of the Floating Rate Certificates to receive payments from the Net WAC Rate Carryover Reserve Account in respect of any Net WAC Cap Carry Forward Amounts may have more than a de minimis value.