Credit Support Annex Master Agreement

In addition to the ISDA master contract, a credit support appendix (“CSA”) can also be concluded, a legal document that regulates legitimate guarantees for derivatives transactions. It is an essential element of trade relations in derivatives and currencies, but it is not mandatory. In other words, depending on the risk profile of the two counterparties (assessed by their rating, etc.), it is possible to act only on the basis of an ISDA agreement with or without CSA. The appendix involves a link to the original agreement, so it is not possible to enter into a CSA without the underlying ISDA master contract (or its local equivalent). In essence, a CSA defines the conditions and rules under which collateral is accounted for or transferred between the two counterparties in order to reduce credit risk resulting from “currency” derivative positions. In view of the above, it is possible to divide eligible assets into two parts: if the amount of delivery on an evaluation date corresponds to or exceeds the minimum amount of the Pledgor`s transfer, the Pledgor must transfer eligible assets with a value at least equal to the amount of delivery. The amount of delivery is the amount in which the amount of credit assistance exceeds the value of all issued guarantees held by the insured party. The amount of credit assistance is the exposure of the guaranteed party, plus The independent amounts of Pledgor, net of the amounts independent of the independent party minus the threshold of the Pledgor. Guarantees must meet the eligibility criteria of the agreement, for example. B the currencies they may have, the types of loans allowed and the discounts applied. [1] There are also rules for resolving disputes relating to the valuation of derivative positions.

ISDA`s governing agreements are required between two parties that trade derivatives under an over-the-counter agreement negotiated privately, not through an established exchange. Most derivatives trading is done through private agreements. A Support Credit Annex (CSA) is a legal document that regulates credit support (assets) for derivatives transactions.

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