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Calculation Agent

What is 'Calculation Agent'

An entity that determines the price of an investment product such as a swap. A calculation agent calculates the value of a derivative or the amount owing from each party. The agent also establishes the price for a structured product and may act as its guarantor and issuer. The calculation agent is not a fiduciary, but is expected to avoid conflicts of interest and act in good faith. Its decisions are considered binding. Any disagreement over the calculation agent's decisions must be resolved by a disinterested third-party dealer.

Explaining 'Calculation Agent'

In the credit default swap market, the calculation agent establishes the contract's cash settlement price to give the investors an alternative to a physical settlement. This price will be based on the highest available bids from market makers. The calculation agent, who is typically either the seller or a third party, sometimes takes on a number of other roles in more complex transactions.


Further Reading


Calculating economic life
www.tandfonline.com [PDF]
… labels, the mundane tools and instruments that allow one to calculate and intervene … and an imagined electronic future, the interrelation between devices for calculating the performance … be wary also of assuming or implying that all modes of economic calculation are derivative …

Peripheral vision: Economic markets as calculative collective devicesPeripheral vision: Economic markets as calculative collective devices
journals.sagepub.com [PDF]
… labels, the mundane tools and instruments that allow one to calculate and intervene … and an imagined electronic future, the interrelation between devices for calculating the performance … be wary also of assuming or implying that all modes of economic calculation are derivative …

Heterogeneous agent models in economics and financeHeterogeneous agent models in economics and finance
www.sciencedirect.com [PDF]
… labels, the mundane tools and instruments that allow one to calculate and intervene … and an imagined electronic future, the interrelation between devices for calculating the performance … be wary also of assuming or implying that all modes of economic calculation are derivative …

Calculated affection? Charting the complex economy of home purchaseCalculated affection? Charting the complex economy of home purchase
www.tandfonline.com [PDF]
… labels, the mundane tools and instruments that allow one to calculate and intervene … and an imagined electronic future, the interrelation between devices for calculating the performance … be wary also of assuming or implying that all modes of economic calculation are derivative …

From long-term savings to instant mortgages: financial demonstration and the role of interaction in marketsFrom long-term savings to instant mortgages: financial demonstration and the role of interaction in markets
journals.sagepub.com [PDF]
… labels, the mundane tools and instruments that allow one to calculate and intervene … and an imagined electronic future, the interrelation between devices for calculating the performance … be wary also of assuming or implying that all modes of economic calculation are derivative …



Q&A About Calculation Agent


How are disagreements resolved over the calculations made by the agents?

Any disagreement over decisions must be resolved by disinterested third-party dealers.

What is a calculation agent?

A calculation agent determines the price of an investment product such as a swap.

What does the calculation agent do?

The calculation agent calculates the value of a derivative or the amount owing from each party.

Who is not considered a fiduciary but is expected to avoid conflicts of interest and act in good faith?

The calculation agent is not considered a fiduciary, but is expected to avoid conflicts of interest and act in good faith.

What role does the Calculation Agent play in credit default swaps?

The Calculation Agent establishes cash settlement prices for CDS contracts to give investors an alternative to physical settlements.

Can you name some other roles that may be played by Calculation Agents?

Yes, they sometimes take on other roles in more complex transactions.

Where can you find out more about this topic?

You can learn more at Wikipedia's article on "Calculation Agent".

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