Netting

Netting is consolidating the value of two or more transactions, payments or positions  in order to create a single value. Netting entails offsetting the value of multiple positions, and can be used to determine which party is owed remuneration in a multiparty agreement.   In the context of credit risk, there are at least three specific types of netting   Close-out netting – A special form of netting which follows certain contractually agreed events (such as the opening of insolvency proceedings), whereby all existing obligations are accelerated such that they become due immediately.   Netting by novation – The legal obligations of the parties to make required payments under one or more series of related transactions are canceled and a new obligation to make only the net payments is created. The parties to the new obligation may be  the same as the parties to the existing obligation. Alternatively, in the context of some clearing house arrangements, there may be some substitution of parties.   Position netting - Also called as Payment/Advisory/Settlement netting, is netting of orders in respect of obligations between one or more parties which neither satisfies nor discharges those original individual obligations. This can be applied either bilaterally or multilaterally and on related or unrelated transactions.   -     Bilateral Netting, the process of consolidating swap agreements       between two parties into a single agreement.       As a result, instead of each swap agreement leading to a stream       of individual payments by either party,       all of the swaps are netted together        so that only one net payment is being made to one party based on the flows of the combined swaps.   -     Multilateral Netting, an arrangement among multiple parties that transactions be summed,       rather than settled individually.       Multilateral netting not only streamlines       the settlement process, it also reduces risk by       specifying that, in the event of a default or some other termination event,        all outstanding contracts are likewise terminated.              Generally speaking, multilateral netting is enabled via a membership organization like an exchange.
Financial Facts:
·         Starbucks has operations in more countries than both Goldman Sachs & JP Morgan Chase. ·         If you invested $100 in Microsoft in 1986, instead of buying a version of Windows 1.0, it would be worth $46,400 today.