The Captain`s Agreement is a document agreed between two parties, which sets standard conditions for all transactions between these parties. Each time a transaction is concluded, the terms of the framework agreement should not be renegotiated and applied automatically. The framework contract also helps to reduce litigation by providing significant resources that define its contractual terms and explain the intent of the contract, thus preventing litigation from beginning and providing a neutral resource for interpreting standard contractual terms. Finally, the framework agreement provides significant assistance in managing risks and credit for the parties. The use of one or more credit support documents is optional, but is common in masteragrements for OTC derivatives transactions. Credit support documents are added when the parties wish to provide for the exchange of security when the risk (in the derivatives covered by the credit support document) of part of the other party exceeds an agreed amount. Credit support documents contain provisions relating to the posting and return of collateral, the types of guarantees that can be used, and the treatment of collateral by the beneficiary. The main advantages of an ISDA management contract are improved transparency and liquidity. As the agreement is standardized, all parties can study the ISDA master agreement to find out how it works. This improves transparency by reducing the possibility of opacity of leakage provisions and clauses. Standardization by an ISDA executive contract also increases liquidity, as the agreement makes it easier for parties to make repeat transactions. Clarifying the terms of such an agreement saves all parties time and legal fees. At the same time as the timetable, the framework agreement defines all the general conditions necessary for the proper distribution of the risks of transactions between the parties, but does not contain specific terms and conditions for a particular transaction.
Once the framework agreement has been concluded, the parties can enter into numerous transactions by agreeing to the essential terms and conditions over the telephone, as confirmed in writing, without the need to re-consider the terms of the framework agreement. The mastery agreement is the central document around which the rest of the ISDA documentation structure is cultivated. The pre-printed framework contract is never amended, with the exception of the addition of the names of the parties, but is adapted to the master agreement by the use of the calendar, a document containing options, additions and changes to the framework contract. The ISDA Masteragrement, published by the International Swaps and Derivatives Association, is the most widely used master service contract for otC derivatives transactions internationally. It is part of a documentary framework that aims to provide comprehensive and flexible documentation on OVER-the-counter derivatives. The framework consists of a master contract, a calendar, confirmations, definition brochures and credit support documentation. The isda masteragrement is a framework agreement that defines the terms and conditions between parties wishing to trade over-the-counter derivatives. There are two main versions that are still widely used on the market: the 1992 ISDA Master Agreement (Multicurrency – Cross Border) and the 2002 ISDA Master Agreement. The framework agreement and timetable define the reasons why one party may impose the closure of covered transactions due to the appearance of a termination event by the other party. Standard termination events include defaults or bankruptcy.
Other closing events that can be added to the calendar include a downgrade of credit data below a specified level. This uniform approach to the agreement is an integral part of the structure and part of the network-based protection offered by the framework agreement.