Three Pillars of the ISDA Master Agreement [PDF]

Jun 9, 2011 - An example. A. ISDA Master Agreement. B. Interest rate. Currency. © Allen & Overy 2011. 2006 ISDA. De

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Idea Transcript


Zoltán Lengyel, Partner Allen & Overy Thursday 9th June 2011 Anatomy of the ISDA Master Agreement

BDK Business Seminar Introduction to OTC Derivatives

© Allen & Overy 2011

Agreement for over-the-counter derivatives – Development of documentation

– International Swaps and Derivatives Association, Inc. (ISDA)

– The ISDA documentation

© Allen & Overy 2011

The ISDA documentation – Master Agreement (with Schedule) – Confirmations for each transaction – Definitions booklets for various types of transactions ("products") – Margin / collateral provisions – User’s guides

© Allen & Overy 2011

An example

A

© Allen & Overy 2011

ISDA Master Agreement

Interest rate swap confirmation

Currency option confirmation

Equity-swap confirmation

2006 ISDA Definitions

1998 FX Currency Options Definitions

2002 ISDA Equity Derivatives Definitions

B

Three Pillars of the ISDA Master Agreement

SINGLE AGREEMENT

© Allen & Overy 2011

FLAWED ASSET/ CONDITIONALITY

CLOSE-OUT NETTING

Close-out netting

$10 Swap 1

$5 Swap 2

PARTY A

$10 2006ISDA Definitions

© Allen & Overy 2011

Swap 3

PARTY B

Close-out netting

$5 (net)

PARTY A

2006ISDA Definitions

© Allen & Overy 2011

PARTY B

Section 5(a) – Events of Default – Failure to Pay or Deliver – Breach of Agreement (in 2002 Master Agreement: Breach of Agreement; Repudiation of Agreement) – Credit Support Default – Misrepresentation – Default Under Specified Transaction – Cross-Default* – Bankruptcy – Merger Without Assumption *Not automatically applicable

© Allen & Overy 2011

Section 5(b) – Termination Events – – – – – –

Illegality Force Majeure Event (2002 Master Agreement only) Tax Event Tax Event Upon Merger Credit Event Upon Merger* Additional Termination Event*

* Not automatically applicable

© Allen & Overy 2011

Questions?

These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP's affiliated undertakings.

© Allen & Overy 2011

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