DEFINITION of 'Master Swap Agreement'

A basic, standardized swap contract created by the International Swaps and Derivatives Association in the late 1980s. The standard agreement identifies the two parties entering the transaction; describes the terms of the arrangement, such as payment, events of default and termination; and lays out all other legalities of the deal.

BREAKING DOWN 'Master Swap Agreement'

By signing a master swap agreement, the two parties who wish to engage in a swap transaction simplify the process because the basic legal terms are already established and only the specific financial terms, such as rate and maturity, must be discussed. Signing a master swap agreement also makes it easier for the same parties to engage in additional transactions in the future because these can be based on the initial agreement.



RELATED TERMS
  1. Bilateral Netting

    The process of consolidating swap agreements between two parties ...
  2. Agreement Value Method

    The most common of three official methods established by the ...
  3. Swap Bank

    A financial institution that acts as an intermediary for interest ...
  4. Forward Swap

    A swap agreement created through the synthesis of two swaps differing ...
  5. Swap Dealer

    An individual who acts as the counterparty in a swap agreement ...
  6. Foreign Currency Swap

    An agreement to make a currency exchange between two foreign ...
Related Articles
  1. Managing Wealth

    An In-Depth Look At The Swap Market

    The swap market plays an important role in the global financial marketplace; find out what you need to know about it.
  2. Trading

    An Introduction To Swaps

    Learn how these derivatives work and how companies can benefit from them.
  3. Trading

    How Are Interest Rate Swaps Valued?

    When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps.
  4. Trading

    Different Types of Swaps

    Investopedia explores the most common types of swap contracts.
  5. Trading

    Currency Swap Basics

    Find out what makes currency swaps unique and slightly more complicated than other types of swaps.
  6. Investing

    What's an Interest Rate Swap?

    An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount.
  7. Investing

    How To Read Interest Rate Swap Quotes

    Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes
  8. Trading

    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 ...
  9. Trading

    Interest Rate Swaps Explained

    Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows.
  10. Trading

    Hedging With Currency Swaps

    The wrong currency movement can crush positive portfolio returns. Find out how to hedge against it.
RELATED FAQS
  1. What would motivate an entity to enter into a swap agreement?

    Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >>
  2. When was the first swap agreement and why were swaps created?

    Learn about the history of swap agreements, the first swap agreement between IBM and the World Bank, and how swaps have evolved ... Read Answer >>
  3. How are swap agreements financed?

    Learn how swap agreements are now cleared by swap execution facilities and require the use of collateral margin to hold, ... Read Answer >>
  4. What is the difference between derivatives and swaps?

    Find out more about derivative securities, swaps, examples of derivatives and swaps, and the main difference between derivative ... Read Answer >>
  5. What are some risks a company takes when entering a currency swap?

    Read about the risks associated with performing a currency swap, including counterparty credit risk in the event that one ... Read Answer >>
  6. Who is the counterparty of a derivative?

    Learn about the counterparty to a derivative contract, and how derivative swap agreements traded over the counter have counterparty ... Read Answer >>
Hot Definitions
  1. IRS Publication 970

    A document published by the Internal Revenue Service (IRS) that provides information on tax benefits available to students ...
  2. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  3. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  4. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  5. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  6. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
Trading Center