Glossary · Instruments
ISDA Master Agreement (ISDA)
The ISDA Master Agreement is the standard contract, published by the International Swaps and Derivatives Association, that governs OTC derivative transactions between two counterparties.
An ISDA framework has layers: the preprinted Master Agreement (1992 or 2002 versions), a negotiated Schedule that customizes terms such as termination events and governing law, a Credit Support Annex (CSA) that sets collateral terms, and individual confirmations for each trade. All transactions under one ISDA form a single agreement, which allows close-out netting on default.
Key negotiated terms include additional termination events (for example NAV decline triggers or key-person events), cross-default thresholds, eligible collateral, haircuts, thresholds and minimum transfer amounts. For funds, NAV triggers are particularly important because a sharp drawdown can give counterparties the right to terminate positions.
Operations teams use ISDA and CSA terms to drive collateral management, confirm trade economics and model counterparty exposure. Fund administrators and auditors review ISDAs to understand netting rights for financial statement presentation. A frequent gap is that NAV trigger levels are not monitored against daily estimates, so the manager learns of a breach from the counterparty.
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