An ISDA Agreement is a standardized master agreement developed by the International Swaps and Derivatives Association that governs over-the-counter derivative transactions between parties. This comprehensive legal framework establishes terms for credit support, netting arrangements, default procedures, and dispute resolution. ISDA agreements reduce legal risks and standardize documentation across global derivatives markets.

ISDA master agreements enable efficient derivatives trading by establishing pre-negotiated terms that apply to multiple transactions between parties. The agreements include credit support annexes (CSAs) that govern collateral requirements and netting provisions that reduce counterparty exposure. Understanding ISDA documentation is essential for institutional derivatives trading and risk management.

Real-world example: Two banks sign an ISDA master agreement enabling them to trade interest rate swaps, currency forwards, and credit default swaps under standardised legal terms, reducing documentation costs and execution time for individual transactions.