Credit Support Annex

AAA

DEFINITION of 'Credit Support Annex'

A credit support annex provides credit protection by setting forth the rules governing the mutual posting of collateral. CSAs are used in documenting collateral arrangements between two parties that trade privately negotiated (over-the-counter) derivative securities. The trade is documented under a standard contract called a master agreement, developed by the International Swaps and Derivatives Association (ISDA). The two parties must sign the ISDA master agreement and execute a credit support annex before they trade derivatives with each other.

INVESTOPEDIA EXPLAINS 'Credit Support Annex'

In addition to executing the ISDA master agreement and credit support annex, issuers must implement proper resolutions that give authorization to execute any derivative transactions. Each issuer must also obtain an opinion from its respective legal counsel about whether both parties can enter into swap transactions. Issuers must also ensure that such contracts are binding and enforceable, and obtain final credit approval from a bank.

RELATED TERMS
  1. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  2. Over-The-Counter - OTC

    A security traded in some context other than on a formal exchange ...
  3. Credit

    1. A contractual agreement in which a borrower receives something ...
  4. Derivative

    A security whose price is dependent upon or derived from one ...
  5. International Swaps and Derivatives ...

    An association created by the private negotiated derivatives ...
  6. Swap

    Traditionally, the exchange of one security for another to change ...
RELATED FAQS
  1. How do companies benefit from interest rate and currency swaps?

    An interest rate swap involves the exchange of cash flows between two parties based on interest payments for a particular ... Read Full Answer >>
Related Articles
  1. Active Trading

    How Companies Use Derivatives To Hedge Risk

    Derivatives can reduce the risks associated with changes in foreign exchange rates, interest rates and commodity prices.
  2. Economics

    What is Earnest Money?

    An earnest money deposit shows the seller that a buyer is serious about purchasing a property.
  3. Retirement

    Time To Hire A Senior Move Manager?

    Watch for these signs that you or an elderly family member may need to downsize and move somewhere easier to manange. A senior move manager can help.
  4. Retirement

    A New Solution To Help Seniors Relocate

    As Americans age – and families try to cope – the new field of senior move managers helps seniors relocate to safer homes with the least possible stress.
  5. Investing Basics

    ISDA Master Agreement

    The ISDA Master Agreement is a document outlining the terms of an over-the-counter derivatives transaction between two parties. This document serves as a standard agreement in these transactions ...
  6. Budgeting

    4 Contract Essentials You Need to Know

    Over your lifetime, you’ll be asked to sign lots of contracts – perhaps agreeing to purchase a home, a car or to join a new gym or online dating service.
  7. Home & Auto

    Home Sale Contingencies: What Buyers And Sellers Need To Know

    Home sale contingencies protect buyers who want to sell one home before purchasing another. Find out what buyers and sellers need to know about these contractual conditions.
  8. Home & Auto

    Contingency Clauses In Home Purchase Contracts

    Here, we introduce widely used contingency clauses in home purchase contracts and how they can benefit both Buyers and Sellers.
  9. Options & Futures

    Easy Ways To Cut Rental Costs

    If rent payments are crippling your finances, then read on to learn how to save your money.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center