RE: FpML-CD Adding support for Fixed Recovery Swaps

Thanks, Jamie. It makes sense for us to meet to discuss both this and your entityType for Single Name proposal.

Our usual meeting day, as you know, is Wednesday 9am NY/2pm LDN – we are too late for tomorrow, so I would instead propose the Wednesday the 18^th.

There is an IBM/Thuderhead seminar at ISDA NY in our usual time slot on the 18th. If there are active CDWG members who were planning on attending that seminar, let me know by end of day tomorrow and we can see if we can move the CDWG to another time. Otherwise, let’s meet on the 18^th to see if we can advance these proposals as well as the outstanding MTF changes for 5.0.

Regards,

Ben Lis

Head of Product Management & Integration

T-Zero

212.323.6041

www.tzero.com

From: cdwg@xxxxxxxx [mailto:cdwg@xxxxxxxx] On Behalf Of Orme, Jamie
Sent: Tuesday, June 10, 2008 3:44 PM
To: cdwg@xxxxxxxx
Subject: FpML-CD Adding support for Fixed Recovery Swaps

CDWG,

We would like to update the creditDefaultSwap schema to fully support Fixed Recovery swaps.

Currently the cashSettlementTerms only allows for Fixed Recovery where an amount is specified:

<cashSettlementTerms>
        <cashSettlementAmount>
                <currency>USD</currency>
                <amount>1500.0</amount>
        </cashSettlementAmount>
</cashSettlementTerms>

We would like to extend this so that a "recovery factor", if applicable, could be included instead. The factor is a fraction that will then be used to calculate the amount of recovery on a Credit Event.

Within our paper flows, we currently confirm this as follows:

1.Settlement Terms:

Terms Relating to Cash Settlement:

Settlement Method: Cash Settlement

Settlement Currency: The currency of denomination of the Floating Rate Payer Calculation Amount

Recovery Factor [0.50]

Cash Settlement Amount (1 minus the Recovery Factor) multiplied by the Floating Rate Payer Calculation Amount

Therefore, we propose to use a new 'FixedRecovery.model' group that will provide a choice between a fixed settlement amount or a recovery factor:

Based on our confirm "snippet", this would then be modelled in FpML as follows:

<cashSettlementTerms>
<recoveryFactor>0.5</recoveryFactor>
</cashSettlementTerms>

To see this change in context, please see the attached schema change.

Could we get together to discuss the above?

Many Thanks

Jamie