1992 ISDA Master Agreement: Analyzing Market Quotation, Set-Off and Loss
University of Oxford - Saint Cross College; Middle Temple; Minerva Chambers
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