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ISDA Master Agreement: the standard swap contract
1987; revised 1992 and 2002· Law or rule
Fact, law or dataA rule, statute, definition or measured number.
The standard contract, published by the International Swaps and Derivatives Association, under which most private derivatives are signed.
See it on the Money & Finance map →How it works
Parties sign one Master Agreement, a preprinted form left unchanged, plus a Schedule that customizes it, for example cross-defaulting to a loan. Each trade is a short Confirmation under it, and an optional Credit Support Annex sets collateral. Key features: all trades form a single agreement; listed events of default and termination events; and close-out netting, so on a default every trade is valued and one net amount is owed. A property owner's bank swap uses it, usually secured by the deed of trust.
Why it matters
It made swaps fast and legally reliable worldwide; enforceable netting shrinks exposures and underpins a market with hundreds of trillions of dollars in notional value (BIS).
Facts, rules and data
ISDA's published 1987, 1992 and 2002 forms, legal opinions on netting enforceability in dozens of countries, and US Bankruptcy Code safe harbors for swaps.
Debates and risks
Disputes over how to value trades at close-out, as after Lehman's 2008 collapse, still reach court, and the 1992 and 2002 forms measure losses differently.
Connections (3)
▸ISDA Master Agreement: the standard swap contract governs most Interest-rate swaps: trading floating payments for fixedFact, law or data
The connection
Almost every privately negotiated interest-rate swap, between dealers or between a bank and a property owner, sits under an ISDA Master Agreement, with each trade added by a short confirmation. Cleared swaps follow clearinghouse rules but use ISDA's rate definitions, including fallbacks that moved trades from LIBOR to SOFR.
When and why
Worldwide since ISDA's first standard form in 1987; its 2020 IBOR Fallbacks Protocol moved most legacy dollar swaps to SOFR terms by mid-2023.
How we know
ISDA's published agreements and definitions, and public adherence lists for its protocols with thousands of signers.
Debates and risks
Whether standardization concentrates risk, since nearly everyone uses the same contract and the same few dealers, is debated.
▸ISDA Master Agreement: the standard swap contract also governed the contracts behind AIG and credit default swapsFact, law or data
The connection
AIG's credit default swaps were signed under ISDA agreements whose credit support annexes required more collateral if AIG's rating fell or the insured bonds lost value. When both happened in September 2008, collateral calls reached tens of billions of dollars, which AIG could not meet without the Fed's rescue.
When and why
At AIG Financial Products, run largely from London, with counterparties such as Goldman Sachs and Société Générale, 2007–08.
How we know
The Financial Crisis Inquiry Commission report and the Congressional Oversight Panel's 2010 AIG report describe the collateral terms and calls.
Debates and risks
Whether the standard collateral terms helped by forcing early recognition of losses, or deepened the panic, is still argued.
▸OTC derivatives: about $850 trillion notional (2025) are papered under the ISDA Master Agreement: the standard swap contractFact, law or data
The connection
Private derivatives need a contract that works in every country. Most are signed under the ISDA Master Agreement: one master form, a negotiated Schedule, a short confirmation per trade, and often a collateral annex. Its close-out netting means that if one side defaults, all trades are netted into one payment.
When and why
Published in 1987 by ISDA, then called the International Swap Dealers Association; the 1992 and 2002 versions are now standard.
How we know
ISDA's published forms, legal opinions on netting in dozens of countries, and bankruptcy-law safe harbors for derivatives.
Debates and risks
How to value trades fairly at close-out in a crisis, as after Lehman's 2008 collapse, is still argued in court.