Foreword
Summary
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3
4
5
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A1
Acknowledgements
Figures and tables
Economic value of English law | Oxera

A1.3: ISDA swaps and derivatives

Published: October 5th 2021
Download the Report Executive Summary Funders
2.1: Introduction 2.2: Economic value is created by ‘gains from trade’—realised through transactions 2.3: The law underpins growth in the volume of transactions (and therefore the generation of economic value) 2.4: Considering the law as infrastructure on which transactions take place
3.1: Introduction 3.2: The economic value created through the UK legal services ecosystem 3.3: The economic value created for the UK as a whole -3.3.1: English law as a global market standard -3.3.2: Agglomeration effects -3.3.3: Reduced transaction costs for UK businesses trading internationally 3.4: The choice of law and legal services for internationally mobile transactions
4.1: Introduction 4.2: English law provides significant value to the UK economy -4.2.1: Maritime sector -4.2.2: Commodity trading -4.2.3: ISDA swaps and derivatives -4.2.4: International insurance contracts -4.2.5: The value of English law to the UK economy is significant 4.3: Risks and opportunities 4.4: Future opportunities for the use of English law represent significant potential value to the UK
5.1: Introduction 5.2: English law suffers from a type of ‘market failure’ 5.3: Solutions to the free-rider problem: coordination across private and public parties 5.4: How to manage the ‘provision’ of English law
Experts Funders
Chapter A1

A1.3: ISDA swaps and derivatives

A derivative is a contract between two or more parties, the value of which is based on an underlying financial asset, index, or security.[1]Examples of underlying assets, indices and securities include commodities, interest rates, stocks, foreign currency. Bank for International Settlements (2016), ‘Glossary’, October. Derivatives are used as financial instruments to help companies hedge various risks—for example, fluctuations in interest rates and foreign currency exchange—that their businesses are exposed to. Derivatives can be traded on securities exchanges that offer standardised contracts, or can be traded OTC, involving privately negotiated contracts between parties.

As OTC derivatives contracts are privately negotiated and are not required to be standardised,[2]Thomson Reuters Practical Law (N.D.), ‘Over-the-counter (OTC) Derivative’. the International Swaps and Derivatives Association (ISDA) developed the ISDA Master Agreement—an umbrella agreement setting out standard contract terms between parties trading OTC derivatives. The ISDA Master Agreement provides parties with certain legal and credit protections, and is commonly used for OTC derivatives transactions internationally.[3]Thomson Reuters Practical Law (N.D.), ‘ISDA Master Agreement’.

References

References
↑1Examples of underlying assets, indices and securities include commodities, interest rates, stocks, foreign currency. Bank for International Settlements (2016), ‘Glossary’, October.
↑2Thomson Reuters Practical Law (N.D.), ‘Over-the-counter (OTC) Derivative’.
↑3Thomson Reuters Practical Law (N.D.), ‘ISDA Master Agreement’.