Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide

INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION (ISDA)

The International Swaps and Derivatives Association (ISDA) is a trade organization of participants in the market for over-the-counter derivatives. Headquartered in New York, it has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions. ISDA has more than 830 members in 57 countries; its membership consists of derivatives dealers, service providers and end users.

Since its inception, ISDA has pioneered efforts to identify and reduce the sources of risk in the derivatives and risk management business. Among its most notable accomplishments are: developing the ISDA Master Agreement; publishing a wide range of related documentation materials and instruments covering a variety of transaction types; producing legal opinions on the enforceability of netting and collateral arrangements (available only to ISDA members); securing recognition of the risk-reducing effects of netting in determining capital requirements; promoting sound risk management practices, and advancing the understanding and treatment of derivatives and risk management from public policy and regulatory capital perspectives.1

The ISDA Master Agreement was first published in 1992, and a second edition was published in 2002. The second edition was drafted in response to market difficulties in the late 1990s, and could be adopted either in a unified form or as standard form amendments to the first edition.

Netting provisions ...