1992 ISDA Master Agreement: Analyzing Market Quotation, Set-Off and Loss
University of Oxford - Saint Cross College; Middle Temple; Freshfields Bruckhaus Deringer LLP
March 28, 2010
This paper analyzes key clauses relevant to valuation in the 1992 ISDA Master Agreement. The paper focuses principally on the section 14 definitions of: Market Quotation and Loss and on ISDA’s Basic Set-off Provision which is frequently added via the Master Agreement Schedule. Additional clauses considered relate to: First and Second Method, Payments on Early Termination, Settlement Amount, Pre-Estimate, Terminated Transactions, Affected Transactions, Termination Events, One and Two Affected Parties, Reference Market-makers, Unpaid Amounts, Calculations and Settlement. The paper highlights both the richness and complexity of specific valuation-related clauses in the 1992 ISDA Master Agreement and in the structure and interpretation of the Master Agreement as a whole. The paper concludes with c.20 additional student drafting questions.
Keywords: ISDA, Valuation, Derivative, Market Quotation, Loss, Set-Off, Master Agreement
JEL Classification: F31, G12, G13, G15, G33, K12, K22, N20
Date posted: January 31, 2010 ; Last revised: January 26, 2011
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