Csa Credit Swap Agreement
A Support Credit Annex (CSA) is a legal document that regulates credit support (assets) for derivatives transactions. It is one of the four parties that make up an ISDA executive contract, but it is not mandatory. It is possible to have an ISDA agreement without CSA, but normally no CSA without ISDA. A master`s contract is required for derivatives trading, although the CSA is not required in the overall document. Since 1992, the framework agreement has been used to define the terms of derivatives trading and make them mandatory and enforceable. Its publisher, ISDA, is an international trade association for participants in futures markets, options and derivatives. Due to the high risk of losses on both sides, derivatives traders generally offer guarantees to support their operations. 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. Given the above, there is a simple way to divide eligible assets into two parts: for repurchase transactions, they are a very specific derivatives transaction and there is no overlap with other related products (as opposed to derivatives such as IRS, cross-hedging swap, FX swap etc.). Buybacks are a regular loan secured by eligible securities such as government bonds, etc. This type of guarantee must also meet the eligibility criteria set out in the CSA, for example.B. The unit value of currencies, the types of loans, their maximum content and the discounts applied.