ISDA’s role in the credit derivatives marketplace

By Louise Marshall

As is typical across the range of asset classes underlying privately negotiated derivatives, the role of the International Swaps and Derivatives Association (ISDA) in the credit derivatives market is diverse. As one would expect, ISDA has played a significant role in establishing the underlying documentation for credit derivatives, this being the area of expertise for which the Association is most widely known. However, the Association has also been extremely active in lobbying for appropriate capital treatment under the new Basel rules, and also in regional regulatory, tax and accounting jurisdictions. Not least, ISDA has served as a forum for market practitioners to address issues relating to the trading conventions best suited to this marketplace.

ISDA also monitors the continued development of the credit default swap (CDS) market. CDSs have become commoditised derivative products to much the same effect as plain vanilla interest rate swaps, accounting for the larger part of the credit derivatives market. In its sampling for the first six months of 2002, ISDA estimated the market size for CDS notional volume at US$1.6 trillion, an increase of 44% for that period. In the

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