Positive market value

Howard Cha

Senior Member
Korean-Korea
Dear Teachers,

Pre-settlement risk (PSR) is the risk that the Branch’s counterparty or customer fails, prior to the settlement date of the transaction, and will be unable to fulfill the transaction. Two elements are necessary for the Branch to declare a loss on the transaction: the counterparty fails or defaults, and the transaction or contract has a positive market value to the Branch. PSR is measured as the potential economic cost to the Branch to replace that failed contract or transaction in the market.

I know what the colored line means.
But in terms of the context, I assume that "positive" should be "negative".
Or if it's right, what does that mean in this case?

Please let me know your thoughts.

Thank you in advance,
Howard Cha
 
Last edited:
  • goldenband

    Senior Member
    English - American
    If a transaction or contract had no "positive market value" for the Branch -- if it wasn't going to be able to make a profit on the planned transaction, basically -- then it wouldn't be harmed if that transaction/contract were unfulfilled.

    You can only declare a loss if you've been deprived of something of value, and a contract that will make a profit for your company is clearly something of value. :) If a contract was going to lose money for your company, it would actually be a good thing if that contract failed -- at least from an accounting perspective -- and so wouldn't be eligible for declaration as a loss.
     

    Howard Cha

    Senior Member
    Korean-Korea
    If a transaction or contract had no "positive market value" for the Branch -- if it wasn't going to be able to make a profit on the planned transaction, basically -- then it wouldn't be harmed if that transaction/contract were unfulfilled.

    You can only declare a loss if you've been deprived of something of value, and a contract that will make a profit for your company is clearly something of value. :) If a contract was going to lose money for your company, it would actually be a good thing if that contract failed -- at least from an accounting perspective -- and so wouldn't be eligible for declaration as a loss.
    Oh, I see. You're my teacher!
     
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