Isda Master Agreement Specified Entity
The ISDA Master Agreement is a standard legal document used to govern over-the-counter derivatives transactions globally. It is a contract between two parties that sets out the terms and conditions under which derivative transactions are entered into between them. One important aspect of the ISDA Master Agreement is the concept of a “specified entity.”
A specified entity is a legal entity that is party to the ISDA Master Agreement. It can be an individual, a corporation, a partnership, or any other legal entity that is able to enter into a legally binding agreement. The specified entity is identified in the Schedule to the ISDA Master Agreement, which sets out the key terms of the agreement, including the identities of the parties, the type of transactions to be entered into, and the governing law.
The concept of a specified entity is important because it determines who is responsible for fulfilling the obligations under the ISDA Master Agreement. For example, if one party to the agreement defaults on its obligations, the other party may have the right to terminate the agreement or take other legal action. In this case, it is important to know which entity is responsible for the defaulting party`s obligations.
In addition, the specified entity also plays a role in determining the creditworthiness of the parties to the ISDA Master Agreement. The creditworthiness of each specified entity is determined by a credit support annex (CSA), which sets out the terms of collateralization for the transactions. The CSA specifies the types of collateral that must be posted by each party, the time frame for posting collateral, and the valuation methodology for the collateral. This ensures that each party is sufficiently collateralized, thereby reducing the risk of default.
Overall, the concept of a specified entity is a critical aspect of the ISDA Master Agreement. It helps to ensure that both parties to the agreement are clear on their respective obligations and responsibilities, and that the transactions are properly collateralized. If you are involved in over-the-counter derivatives transactions, it is important to understand the concept of a specified entity and ensure that the ISDA Master Agreement is properly executed and implemented.
