Using and Negotiating Over-the-counter Derivatives Documentation [Paperback]by Christian JohnsonThis book is OUT OF PRINT You may be able to find a copy at ABE Books Description of Using and Negotiating Over-the-counter Derivatives DocumentationMake sure you completely understand the ISDA Agreements and how to apply them in OTC derivatives transactions.How does the 2002 Master Agreement differ from earlier Agreements? What are the key issues in using and negotiating the Agreements? Everything you need to know about OTC derivatives transactions in one easy guide! An accurate, complete and efficient source for information about the salient business, credit and legal issues in OTC derivative documentation. The same, practical advice you expect from weekly Learning Curves in one new volume. This book is your complete guide to * a detailed explanation of how the Commodity Exchange Act affects OTC derivatives * summary of the accounting for derivatives and the effect of FAS 133 * collateral issues * events of default and caluculation of damages * insolvency and bankruptcy of counterparties * withholding tax considerations * modifying loan documentation to take into account a borrower's use of derivatives Includes a reproduction of the ISDA Agreement and selected reading lists at the end of each chapter, providing you with sources for more technical discussions. Ideal for lawyers and documentation specialists as a quick resource to use during negotiations and for those wanting to understand the basic issues in OTC derivatives documenation. From the Editors of Derivatives Week and Institutional Investor Books. Title Information
Write a review of this book Customer Reviews from AmazonContents of Using and Negotiating Over-the-counter Derivatives Documentation1. An overview of OTC derivativesDefinition of �derivative� Exchange versus OTC derivatives Examples of exchange derivatives Examples of OTC derivatives Regulation: exchange versus OTC Standardization versus customization Development of the OTC derivative market OTC derivative participants Dealers End-users Speculators Role of ISDA Interest rate derivatives Plain vanilla interest rate swap Interest rate caps Currency derivatives Commodity derivatives Equity derivatives Credit derivatives Standardization ISDA standard forms Confirmations ISDA Master Agreements Schedule Credit Support Documents Other ISDA materials 2. The documentation process Beginning the process Use of dealer�s form of the Schedule No change to pre-printed ISDA forms Role of the documentation specialist Approval process for dealers Negotiating the ISDA Master Agreement Multicurrency-Cross Border versus Local Currency- Single Jurisdiction Timing of negotiations Negotiating the Schedule Negotiating the Confirmation Economic terms Definitions Standard provisions Responsibility for preparation Long-form Confirmations Master Confirmations Negotiating Credit Support Documents ISDA Credit Support Annex Bilateral obligations Guaranties and other forms of credit support Other negotiating considerations Abdicating negotiations to the lawyers Requesting non-market amendments Failure to get document deliveries Lean and mean staffing Prisoner to one�s own policies 3. Key issues in the 1992 ISDA Master Agreement Specified Entity Specified Transaction Cross Default Election Definition of Specified Indebtedness Default threshold Cross acceleration Credit Event Upon Merger Automatic Early Termination Payments on Early Termination Additional Termination Events Changes in financial condition Unique concerns Tax representations Agreement to deliver documents Certified resolutions Incumbency certificate Financial statements Legal opinions Multibranch Party Calculation Agent Credit Support Documents and Credit Support Providers Governing law Specifying New York law Choice of forum Netting Affiliate Contractual set-off provision Set-off rights under New York law ISDA�s contractual set-off provision Expansion to include affiliates Set-off provisions and multi-lender loan agreements 4. Understanding the 2002 ISDA Master Agreement Early termination payments (damages) The Close-Out Amount Cure periods Default under Specified Transactions Credit Event Upon Merger Force majeure Termination Event Payee tax representations Interest accrual provisions 5. Key collateral issues Importance of collateral ISDA Credit Support Annex Threshold Threshold amounts Dealer�s threshold amount Independent Amount Minimum Transfer Amount Eligible collateral Cash U.S. government securities Agency debt securities Mortgage-backed securities Euros and European government securities Other collateral Calls for collateral Valuation Date and Valuation Time Specified Conditions Rehypothecation Motivation behind rehypothecation Minimizing risks of rehypothecation 6. Calculation of damages Fluctuating obligations Termination of the ISDA Master Agreement Events of Default Failure to Pay or Deliver � Section 5(a)(i) Breach of Agreement � Section 5(a)(ii) Credit Support Default � Section 5(a)(iii) Misrepresentation � Section 5(a)(iv) Default under Specified Transaction � Section 5(a)(v) Cross Default � Section 5(a)(vi) Bankruptcy � Section 5(a)(vii) Merger Without Assumption � Section 5(a)(viii) Termination Events Illegality � Section 5(b)(i) Tax Event and Tax Event Upon Merger � Sections 5(b)(ii) and (b)(iii) Credit Event Upon Merger � Section 5(b)(iv) Additional Termination Events � Section 5(b)(v) Payments on Early Termination Payments for Events of Default First Method versus Second Method Market Quotation versus Loss Example: Second Method and Market Quotation Payments for Termination Events One Affected Party Two Affected Parties and mid-market calculation Changes under the 2002 Master Agreement 7. Representations Basic Representations Commodity Exchange Act Background 1989 Policy Statement CFTC Regulation � 17 CFR Part 35 Commodity Futures Modernization Act Excluded commodities Exempt commodities CFMA representations Eligible Contract Participation CFTC Regulation and Policy Statement representations Swap agreement Standardized agreements Credit risk Line of business Non-reliance Background Suggested representations Security law representations Regulation EE representation 8. OTC derivatives and insolvency Effects of uncertain legal treatment U.S. Bankruptcy Code concerns Swap participant and swap agreement The automatic stay Problems of the automatic stay Exemption from automatic stay for swap agreements Terminating the ISDA Master Agreement Netting and cherry picking Preference payments and avoiding power Banking insolvency law concerns Close-out netting Pre-insolvency payments Automatic Early Termination Concerns with Automatic Early Termination Remaining importance of Automatic Early Termination FDICIA Definition of financial institution Qualitative test Quantitative test Pending legislation Definition of swap agreement Cross-product master agreements FDICIA changes Other changes 9. International tax withholding issues Gross-up mechanics Gross-up example Indemnifiable Tax U.S. tax withholding and IRS reporting concerns Characterization of derivative payments Resolution of U.S. withholding concerns U.S. tax representations Payor tax representation U.S. payee tax representations Treaty representation Effectively connected representation U.S. person Non-U.S. branch of a foreign person Foreign person Not-effectively connected representation U.S. tax withholding forms Interest payments under the ISDA Master Agreement Other tax withholding considerations Tax Event Termination Event Tax Event Upon Merger Termination Event 10. OTC derivatives and loan documentation Loan Documentation Review Controlling use of OTC derivatives Defining OTC derivatives Measuring OTC derivatives Indebtedness covenant Tenor, purpose, and counterparty quality Tenor Purpose Quality of counterparty Agent approval Lien covenant Affirmative covenants Default provisions Securing OTC derivative transaction obligations Multi-lender loan agreements Potential conflicts Declaring an Event of Default Application of proceeds Paying off the loan Incorporation of loan covenants 11. Accounting for derivatives Definition of a derivative Exclusions from FAS 133 Embedded derivatives Overview of accounting for derivatives Fair-value hedges Cash-flow hedges Foreign-currency hedges Financial Statement Disclosure Appendix 1: Multicurrency-Cross Border ISDA Master Agreement (1992 Version) Appendix 2: Example of Interest Rate Swap Confirmation Appendix 3: Selected bibliography Appendix 4: Selected OTC derivative websites Appendix 5: Other related websites |
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