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ISDA also creates industry standards for derivatives and provides legal definitions of terms used in contracts. An example is the 1999 ISDA Credit Derivatives Definitions, which provide basic definitions for credit default swaps, total return swaps, credit linked notes and other credit derivative transactions. [4]
The ISDA Master Agreement, published by the International Swaps and Derivatives Association, is the most commonly used master service agreement for OTC derivatives transactions internationally. It is part of a framework of documents, designed to enable OTC derivatives to be documented fully and flexibly.
The ISDA [7] reported in April 2007 that total notional amount on outstanding credit derivatives was $35.1 trillion with a gross market value of $948 billion (ISDA's Website). As reported in The Times on September 15, 2008, the "Worldwide credit derivatives market is valued at $62 trillion".
A Credit Support Annex (CSA) is a legal document that regulates credit support for derivative transactions.Effectively, a CSA defines the terms under which collateral is posted or transferred between swap counterparties to mitigate the credit risk arising from in the money derivative positions.
The events triggering a credit derivative are defined in a bilateral swap confirmation which is a transactional document that typically refers to an International Swaps and Derivatives Association (ISDA) master agreement previously executed between the two swap counterparties. The ISDA is a global trade organization for OTC derivatives, and ...
Subsequently, replaced with the 2003 ISDA Credit Derivatives Definitions, [129] and later the 2014 ISDA Credit Derivatives Definitions, [130] each definition update seeks to ensure the CDS payoffs closely mimic the economics of the underlying reference obligations (bonds).
The SEF-execution mandate responds to one of the four derivatives-related European Union, have proposed similar changes in swap market structure [6] but none have yet been adopted. [ 7 ] [ 8 ] As of October 2, 2013, any swap listed by a SEF may be traded by the parties on the SEF, but may also be traded off-SEF in any other lawful manner.
From late 2002, the CDS market began to standardize credit default swap contracts so that they would all mature on one of the four days of 20 March, 20 June, 20 September and 20 December. [1] These dates are used both as termination dates for the contracts and as the dates for quarterly premium payments.