# How Does the Isda Master Agreement Define Eligible Collateral? ▴ Question

**Published:** 2025-08-13
**Categories:** Question

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## Concept

The International Swaps and [Derivatives Association](https://prime.greeks.live/question/why-is-the-margin-period-of-risk-typically-longer-for-uncleared-derivatives-than-for-cleared-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (ISDA) Master Agreement itself does not contain a specific, universal definition of “Eligible Collateral.” Instead, it establishes a standardized legal architecture for privately negotiated derivatives transactions. The operational details of credit risk mitigation, including the specification of what assets are acceptable as collateral, are articulated within a distinct, yet integral, document known as the Credit Support Annex (CSA). The CSA functions as a supplement to the [ISDA Master Agreement](https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and it is within this annex that two counterparties bilaterally define the terms of collateral exchange. This modular design is a foundational strength of the ISDA framework, allowing the core legal terms of the Master Agreement to remain constant while providing the flexibility for parties to customize collateral arrangements to suit their specific credit profiles, risk appetites, and transactional relationship.

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## The Centrality of the Credit Support Annex

The CSA is the engine of collateralization in the over-the-counter (OTC) derivatives market. While an ISDA [Master Agreement](https://prime.greeks.live/question/in-what-ways-does-the-single-agreement-principle-of-the-isda-master-agreement-differ-from-traditional-contract-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can exist without a CSA, the reverse is not true; the CSA is always subordinate to the Master Agreement. Its primary purpose is to mitigate the [counterparty credit risk](https://prime.greeks.live/area/counterparty-credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that arises from fluctuations in the market value of derivative positions.

When one party’s side of a derivatives contract is “in-the-money,” meaning it has a positive market value, the other party is “out-of-the-money” and represents a [credit exposure](https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The CSA provides the mechanics for the out-of-the-money party to post collateral to the in-the-money party, thereby securing the obligation.

> The definition of Eligible Collateral is a negotiated outcome documented in the Credit Support Annex, not a prescribed list within the main ISDA Master Agreement.

The negotiation of what constitutes “[Eligible Collateral](https://prime.greeks.live/area/eligible-collateral/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” is a critical exercise in risk management. The selection of permissible assets directly impacts the liquidity, operational burden, and funding costs associated with the derivatives portfolio. A narrowly defined list of eligible assets, such as cash in a specific currency, offers high liquidity and low valuation ambiguity. A broader list, which might include various government or corporate bonds, provides greater flexibility for the [collateral provider](https://prime.greeks.live/question/how-does-collateral-optimization-differ-from-collateral-transformation-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) but introduces complexities around valuation, haircuts, and correlation with the underlying exposure.

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## Key Elements Defined in the CSA

The CSA operationalizes the collateral relationship by defining several key parameters. These elements work in concert to create a dynamic system for managing credit exposure. The core components include:

- **Eligible Collateral** ▴ A specific list of asset types that the parties agree are acceptable for posting as collateral. This can range from cash in various currencies to a wide array of government and corporate debt securities.

- **Threshold** ▴ An amount of unsecured credit exposure that a party is willing to tolerate before a collateral call can be made. If the mark-to-market exposure is below this threshold, no collateral is required to be posted.

- **[Minimum Transfer Amount](https://prime.greeks.live/area/minimum-transfer-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (MTA)** ▴ The smallest amount of collateral that can be requested in a [margin call](https://prime.greeks.live/area/margin-call/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This is designed to prevent trivial and operationally burdensome collateral movements for minor changes in exposure.

- **[Independent Amount](https://prime.greeks.live/area/independent-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (IA)** ▴ An amount of collateral that one or both parties may be required to post at the outset of the trading relationship, independent of any mark-to-market exposure. It functions similarly to an initial margin and provides an additional layer of protection.

- **[Valuation Percentage](https://prime.greeks.live/area/valuation-percentage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (Haircut)** ▴ A discount applied to the market value of non-cash collateral to account for its potential volatility and liquidity risk. For example, a government bond might have a valuation percentage of 98%, meaning that for every $100 of bonds posted, only $98 of credit is given.

These components are not just administrative details; they are the levers through which firms manage their counterparty risk and liquidity. The negotiation of these terms is a sophisticated process that reflects each party’s creditworthiness, the nature of the underlying derivatives, and the prevailing regulatory environment.

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## Strategy

The strategic definition of Eligible Collateral within the [Credit Support Annex](https://prime.greeks.live/area/credit-support-annex/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a foundational element of counterparty [risk management](https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and capital efficiency. The choices made during the negotiation of the CSA have far-reaching implications for a firm’s liquidity, funding costs, and operational workflows. A well-constructed collateral framework can provide a significant competitive advantage, while a poorly designed one can introduce unintended risks and operational friction.

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## Crafting the Collateral Spectrum

The negotiation of what constitutes Eligible Collateral involves a trade-off between flexibility for the collateral provider and liquidity and safety for the collateral receiver. The spectrum of potential collateral assets can be broadly categorized, with each category presenting distinct strategic considerations.

A typical negotiation will result in a tiered list of acceptable assets, often with corresponding valuation percentages ([haircuts](https://prime.greeks.live/area/haircuts/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)). The more liquid and less volatile an asset is, the lower its haircut will be. A highly-rated sovereign bond, for instance, will have a much smaller haircut than a lower-rated corporate bond, reflecting the lower risk associated with the former.

The following table illustrates a sample hierarchy of eligible collateral and the strategic rationale behind their inclusion:

| Collateral Type | Typical Valuation Percentage (Haircut) | Strategic Rationale |
| --- | --- | --- |
| Cash (in major currencies like USD, EUR, GBP) | 100% (0% haircut) | Highest liquidity, no valuation disputes, operationally simple. The preferred form of collateral for many institutions. |
| High-Quality Government Bonds (e.g. U.S. Treasuries, German Bunds) | 98-99% (1-2% haircut) | High liquidity and low credit risk. Allows firms to use existing bond portfolios for collateral, freeing up cash. |
| Other Government Bonds | 90-95% (5-10% haircut) | Provides additional flexibility but introduces greater price volatility and liquidity risk, hence the higher haircut. |
| Investment-Grade Corporate Bonds | 85-95% (5-15% haircut) | Offers significant flexibility for firms with large corporate bond holdings. Haircuts are higher due to credit and liquidity risk. |
| Equities (major indices) | 70-85% (15-30% haircut) | Less common due to high volatility and wrong-way risk (the risk that the collateral’s value falls at the same time the exposure increases). |

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## The Interplay of Key CSA Terms

The definition of Eligible Collateral does not exist in a vacuum. Its effectiveness is determined by its interaction with other key terms in the CSA. The strategic calibration of these terms is essential for creating a robust and efficient collateral management system.

> A thoughtfully negotiated Credit Support Annex balances the need for risk mitigation with the operational and funding realities of the business.

The following table outlines the strategic interplay between Eligible Collateral and other critical CSA parameters:

| CSA Term | Strategic Objective | Interaction with Eligible Collateral |
| --- | --- | --- |
| Threshold | To establish a level of acceptable unsecured risk, reducing operational churn for small exposures. | A higher threshold may be acceptable if the list of Eligible Collateral is restricted to highly liquid assets like cash and government bonds. |
| Minimum Transfer Amount (MTA) | To prevent operationally costly collateral movements for minor changes in exposure. | The MTA is often set in relation to the overall size of the portfolio and the volatility of the Eligible Collateral. |
| Independent Amount (IA) | To provide a buffer against potential future exposure or to address specific credit concerns. | The form of the IA is often restricted to the highest quality Eligible Collateral, such as cash. |
| Valuation and Dispute Resolution | To ensure a fair and transparent process for valuing collateral and resolving disagreements. | A broader and less liquid list of Eligible Collateral increases the likelihood of valuation disputes, making robust dispute resolution procedures essential. |

The negotiation of these terms is a dynamic process. A party with a strong credit rating may be able to negotiate a higher threshold and a broader range of acceptable collateral. Conversely, a less creditworthy party will likely face a lower threshold, a higher Independent Amount, and a more restrictive list of Eligible Collateral. The ultimate goal is to arrive at a set of terms that accurately reflects the [credit risk](https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of the relationship while minimizing unnecessary operational and funding burdens.

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## Execution

The execution of the collateral management process under the ISDA framework is a daily, operationally intensive activity. It requires precise calculations, timely communication, and robust systems to ensure that credit exposures are accurately collateralized in accordance with the terms of the [Credit Support](https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Annex. The definition of Eligible Collateral is at the heart of this process, influencing every step from valuation to settlement.

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## The Margin Call Lifecycle

The core operational process of the CSA is the margin call. This is the mechanism by which a party with a net credit exposure requests collateral from its counterparty. The lifecycle of a margin call is a well-defined process:

- **Valuation** ▴ At an agreed-upon frequency (typically daily), both parties value the outstanding derivatives portfolio. This valuation determines the current mark-to-market (MTM) exposure for each party.

- **Calculation of the [Credit Support Amount](https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ The “Credit [Support Amount](https://prime.greeks.live/question/how-does-the-threshold-amount-interact-with-the-independent-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” is calculated, which represents the total collateral requirement. This is broadly defined as the MTM exposure, plus any Independent Amount, less the agreed-upon Threshold.

- **Determination of the Delivery or Return Amount** ▴ The Credit Support Amount is compared to the value of the collateral already held. If the Credit Support Amount exceeds the value of the posted collateral, a “Delivery Amount” is calculated, triggering a margin call. If the value of the posted collateral exceeds the Credit Support Amount, a “Return Amount” is calculated, and excess collateral must be returned.

- **The Margin Call** ▴ The party entitled to receive collateral issues a margin call to its counterparty, specifying the Delivery Amount.

- **Collateral Transfer** ▴ The counterparty must then deliver Eligible Collateral with a value (after applying the relevant haircut) at least equal to the Delivery Amount. The choice of which asset to deliver, from the list of Eligible Collateral, is typically at the discretion of the delivering party.

- **Settlement and Reconciliation** ▴ The collateral is transferred, and the parties reconcile their records to confirm that the exposure has been properly collateralized.

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## Legal Frameworks and Their Impact on Execution

The legal framework governing the CSA has a profound impact on the execution of the collateral management process, particularly concerning the rights of the collateral holder. The two most common legal frameworks are the [New York law](https://prime.greeks.live/area/new-york-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) CSA, which creates a “[security interest](https://prime.greeks.live/question/how-does-a-bankruptcy-filing-affect-an-unperfected-security-interest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” in the collateral, and the English law CSA, which involves an “outright transfer” of title.

The choice of governing law is a critical strategic decision with significant operational and risk management consequences.

- **New York Law (Security Interest)** ▴ Under this framework, the collateral provider (Pledgor) retains title to the collateral, but grants the collateral taker ([Secured Party](https://prime.greeks.live/question/can-a-secured-party-purchase-the-collateral-at-its-own-disposition-sale/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) a security interest over it. This means the Secured Party holds the collateral on behalf of the Pledgor and its rights to use that collateral are restricted.

- **[English Law](https://prime.greeks.live/area/english-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (Outright Transfer)** ▴ This framework involves a full transfer of title to the collateral from the Pledgor to the Secured Party. The Secured Party becomes the legal owner of the collateral and has a contractual obligation to return an equivalent amount of collateral upon satisfaction of the secured obligations. This structure permits the [rehypothecation](https://prime.greeks.live/area/rehypothecation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of collateral ▴ the right of the Secured Party to reuse the collateral for its own purposes.

The following table compares the key execution differences between the two legal frameworks:

| Feature | New York Law (Security Interest) | English Law (Outright Transfer) |
| --- | --- | --- |
| Title to Collateral | Remains with the Pledgor. | Transfers to the Secured Party. |
| Right of Rehypothecation | Generally prohibited unless explicitly permitted. | Generally permitted, providing the Secured Party with a source of funding and liquidity. |
| Insolvency Treatment | The Pledgor’s ownership is clear, which can simplify the return of collateral in an insolvency scenario. | The Pledgor becomes an unsecured creditor for the return of its collateral, which can be more complex in an insolvency. |
| Operational Complexity | May require segregated accounts to maintain the integrity of the security interest. | Operationally simpler for the Secured Party, as the collateral can be commingled with its own assets. |

The choice between these frameworks is influenced by the regulatory environment, the creditworthiness of the counterparties, and their respective funding and liquidity needs. The ability to rehypothecate collateral under English law can be a valuable source of financing for prime brokers and other financial institutions, but it also introduces a higher level of risk for the collateral provider.

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## References

- International Swaps and Derivatives Association. “ISDA Master Agreement.” 2002.

- International Swaps and Derivatives Association. “1994 ISDA Credit Support Annex (New York Law).” 1994.

- International Swaps and Derivatives Association. “1995 ISDA Credit Support Annex (English Law).” 1995.

- Gregory, Jon. “The xVA Challenge ▴ Counterparty Credit Risk, Funding, Collateral, and Capital.” Wiley Finance, 2015.

- Singh, Manmohan. “Collateral and Financial Plumbing.” Risk Books, 2013.

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## Reflection

Understanding the mechanics of Eligible Collateral within the ISDA framework transcends a mere procedural checklist. It is an exercise in appreciating the intricate architecture of modern financial risk management. The definition of acceptable assets, the calibration of haircuts, and the choice of legal framework are not static inputs but dynamic components of a system designed to ensure market stability and institutional resilience.

The true mastery of this domain lies in recognizing that the terms of a Credit [Support Annex](https://prime.greeks.live/question/what-are-the-primary-legal-and-operational-challenges-in-negotiating-a-credit-support-annex/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) are a direct reflection of a firm’s risk appetite, its operational capabilities, and its strategic posture in the market. The knowledge gained here is a component in a larger system of intelligence, one that empowers an institution to not only mitigate risk but also to optimize its financial resources and secure a lasting operational advantage.

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## Glossary

<a href="https://prime.greeks.live/question/why-is-the-margin-period-of-risk-typically-longer-for-uncleared-derivatives-than-for-cleared-derivatives/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Derivatives Association

The longer Margin Period of Risk for uncleared derivatives reflects the higher time and complexity needed to resolve a bilateral default. </a><a href="https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Isda Master Agreement

Meaning ▴ The ISDA Master Agreement is a standardized contractual framework for privately negotiated over-the-counter (OTC) derivatives transactions, establishing common terms for a wide array of financial instruments. </a><a href="https://prime.greeks.live/area/counterparty-credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Counterparty Credit Risk

Meaning ▴ Counterparty Credit Risk quantifies the potential for financial loss arising from a counterparty's failure to fulfill its contractual obligations before a transaction's final settlement. </a><a href="https://prime.greeks.live/question/in-what-ways-does-the-single-agreement-principle-of-the-isda-master-agreement-differ-from-traditional-contract-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Master Agreement

The ISDA's Single Agreement principle architects a unified risk entity, replacing severable contracts with one indivisible agreement to enable close-out netting. </a><a href="https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Credit Exposure

The ISDA CSA is a protocol that systematically neutralizes daily credit exposure via the margining of mark-to-market portfolio values. </a><a href="https://prime.greeks.live/area/eligible-collateral/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Eligible Collateral

Meaning ▴ Eligible Collateral designates specific asset classes, typically high-quality liquid assets, that a counterparty is contractually permitted to post to secure financial obligations, particularly within institutional digital asset derivatives. </a><a href="https://prime.greeks.live/question/how-does-collateral-optimization-differ-from-collateral-transformation-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Collateral Provider

Collateral optimization is a strategic system for efficient asset allocation; transformation is a tactical process for asset conversion. </a><a href="https://prime.greeks.live/area/minimum-transfer-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Minimum Transfer Amount

Meaning ▴ The Minimum Transfer Amount defines the smallest permissible unit of an asset or value that can be moved within a specified system or protocol. </a><a href="https://prime.greeks.live/area/margin-call/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Margin Call

Meaning ▴ A Margin Call constitutes a formal demand from a brokerage firm to a client for the deposit of additional capital or collateral into a margin account. </a><a href="https://prime.greeks.live/area/independent-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated metallic mechanism with a central pivoting component and parallel structural elements, indicative of a precision engineered RFQ engine. Polished surfaces and visible fasteners suggest robust algorithmic trading infrastructure for high-fidelity execution and latency optimization](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-mechanism-for-institutional-digital-asset-derivatives-rfq-and-high-fidelity-execution.jpg)

## Independent Amount

Meaning ▴ The Independent Amount defines a specific, fixed quantity of collateral that one counterparty provides to another at the inception of a derivatives relationship, or upon specific trigger events, entirely independent of the daily mark-to-market fluctuations of the underlying derivatives portfolio. </a><a href="https://prime.greeks.live/area/valuation-percentage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, multi-faceted plane represents a Principal's operational framework and Execution Management System. A central glossy black sphere signifies a block trade digital asset derivative, executed with atomic settlement via an RFQ protocol's private quotation](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-principal-os-high-fidelity-execution.jpg)

## Valuation Percentage

Meaning ▴ The Valuation Percentage represents a calibrated factor applied to the notional or mark-to-market value of a digital asset to determine its effective collateral value or its contribution to a risk calculation. </a><a href="https://prime.greeks.live/area/credit-support-annex/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A luminous digital market microstructure diagram depicts intersecting high-fidelity execution paths over a transparent liquidity pool. A central RFQ engine processes aggregated inquiries for institutional digital asset derivatives, optimizing price discovery and capital efficiency within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-principal-operational-framework-price-discovery.jpg)

## Credit Support Annex

Meaning ▴ The Credit Support Annex, or CSA, is a legal document forming part of the ISDA Master Agreement, specifically designed to govern the exchange of collateral between two counterparties in over-the-counter derivative transactions. </a><a href="https://prime.greeks.live/area/risk-management/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A vibrant blue digital asset, encircled by a sleek metallic ring representing an RFQ protocol, emerges from a reflective Prime RFQ surface. This visualizes sophisticated market microstructure and high-fidelity execution within an institutional liquidity pool, ensuring optimal price discovery and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-framework.jpg)

## Risk Management

Meaning ▴ Risk Management is the systematic process of identifying, assessing, and mitigating potential financial exposures and operational vulnerabilities within an institutional trading framework. </a><a href="https://prime.greeks.live/area/haircuts/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A transparent teal prism on a white base supports a metallic pointer. This signifies an Intelligence Layer on Prime RFQ, enabling high-fidelity execution and algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-derivatives-rfq-execution-prime-microstructure-liquidity.jpg)

## Haircuts

Meaning ▴ Haircuts represent a predefined percentage reduction applied to the market value of collateral assets posted against a loan or derivative exposure. </a><a href="https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, circular, metallic-toned device features a central, highly reflective spherical element, symbolizing dynamic price discovery and implied volatility for Bitcoin options. This private quotation interface within a Prime RFQ platform enables high-fidelity execution of multi-leg spreads via RFQ protocols, minimizing information leakage and slippage](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution-hub.jpg)

## Credit Risk

Meaning ▴ Credit risk quantifies the potential financial loss arising from a counterparty's failure to fulfill its contractual obligations within a transaction. </a><a href="https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Segmented beige and blue spheres, connected by a central shaft, expose intricate internal mechanisms. This represents institutional RFQ protocol dynamics, emphasizing price discovery, high-fidelity execution, and capital efficiency within digital asset derivatives market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimal-execution.jpg)

## Credit Support

The ISDA CSA is a protocol that systematically neutralizes daily credit exposure via the margining of mark-to-market portfolio values. </a><a href="https://prime.greeks.live/question/how-does-the-isda-credit-support-annex-function-to-reduce-daily-credit-exposure/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek metallic structures with glowing apertures symbolize institutional RFQ protocols. These represent high-fidelity execution and price discovery across aggregated liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivatives-trading-systems-optimizing-rfq-protocols-for-institutional-block-trade-execution.jpg)

## Credit Support Amount

The ISDA CSA is a protocol that systematically neutralizes daily credit exposure via the margining of mark-to-market portfolio values. </a><a href="https://prime.greeks.live/question/how-does-the-threshold-amount-interact-with-the-independent-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated mechanism depicting the high-fidelity execution of institutional digital asset derivatives. It visualizes RFQ protocol efficiency, real-time liquidity aggregation, and atomic settlement within a prime brokerage framework, optimizing market microstructure for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-execution-liquidity-aggregation-system.jpg)

## Support Amount

The Independent Amount is a static buffer, while the Threshold is a dynamic trigger; their interplay defines the collateral call mechanism. </a><a href="https://prime.greeks.live/question/how-does-a-bankruptcy-filing-affect-an-unperfected-security-interest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The image depicts two interconnected modular systems, one ivory and one teal, symbolizing robust institutional grade infrastructure for digital asset derivatives. Glowing internal components represent algorithmic trading engines and intelligence layers facilitating RFQ protocols for high-fidelity execution and atomic settlement of multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-1.jpg)

## Security Interest

A bankruptcy filing empowers a trustee to void an unperfected security interest, converting the creditor's claim from secured to unsecured. </a><a href="https://prime.greeks.live/area/new-york-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A modular component, resembling an RFQ gateway, with multiple connection points, intersects a high-fidelity execution pathway. This pathway extends towards a deep, optimized liquidity pool, illustrating robust market microstructure for institutional digital asset derivatives trading and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocol-layer-connecting-institutional-digital-asset-liquidity-pools.jpg)

## New York Law

Meaning ▴ New York Law refers to the comprehensive body of statutes, regulations, and judicial precedents established within the State of New York. </a><a href="https://prime.greeks.live/question/can-a-secured-party-purchase-the-collateral-at-its-own-disposition-sale/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered, stacked components embody a Principal OS for institutional digital asset derivatives. This multi-layered structure visually represents market microstructure elements within RFQ protocols, ensuring high-fidelity execution and liquidity aggregation](https://options.greeks.live/wp-content/uploads/2025/07/principal-os-architecture-for-institutional-digital-asset-derivatives-rfq.jpg)

## Secured Party

A secured party can purchase collateral at its own disposition sale, a right conditioned by the sale's public or private structure to ensure commercially reasonable value realization. </a><a href="https://prime.greeks.live/area/rehypothecation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered metallic discs, interconnected by a central spindle, against a deep void, symbolize the core architecture of an Institutional Digital Asset Derivatives RFQ protocol. This setup facilitates private quotation, robust portfolio margin, and high-fidelity execution, optimizing market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-core-infrastructure.jpg)

## Rehypothecation

Meaning ▴ Rehypothecation defines a financial practice where a broker-dealer or prime broker utilizes client collateral, posted for margin or securities lending, as collateral for its own borrowings or to cover its proprietary positions. </a><a href="https://prime.greeks.live/area/english-law/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric structure with sharp angles and translucent planes, symbolizing institutional digital asset derivatives market microstructure. The central point signifies a core RFQ protocol engine, enabling precise price discovery and liquidity aggregation for multi-leg options strategies, crucial for high-fidelity execution and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/principals-operational-framework-optimizing-institutional-digital-asset-derivatives-rfq-protocol-execution-for-alpha-generation.jpg)

## English Law

Meaning ▴ English Law defines a foundational legal system providing jurisdictional certainty for contractual obligations and property rights within the United Kingdom, serving as a critical component for structuring institutional digital asset operations. </a><a href="https://prime.greeks.live/question/what-are-the-primary-legal-and-operational-challenges-in-negotiating-a-credit-support-annex/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric forms depict institutional digital asset derivatives trading. A dark, speckled surface represents fragmented liquidity and complex market microstructure, interacting with a clean, teal triangular Prime RFQ structure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-system-for-prime-os-liquidity-pool.jpg)

## Support Annex

The primary challenges in negotiating a Credit Support Annex are aligning legal terms with operational realities to create a dynamic risk mitigation system. </a>

**Tags:** [New York Law](https://options.greeks.live/area/new-york-law/), [Credit Risk](https://options.greeks.live/area/credit-risk/), [English Law](https://options.greeks.live/area/english-law/), [Independent Amount](https://options.greeks.live/area/independent-amount/), [Minimum Transfer Amount](https://options.greeks.live/area/minimum-transfer-amount/), [Swaps and Derivatives](https://options.greeks.live/area/swaps-and-derivatives/)	

## Discover More

- 
### [What Are the Primary Legal Agreements Needed to Manage Bilateral Counterparty Risk in RFQ Trading?](https://options.greeks.live/question/what-are-the-primary-legal-agreements-needed-to-manage-bilateral-counterparty-risk-in-rfq-trading/)
![A sleek, illuminated object, symbolizing an advanced RFQ protocol or Execution Management System, precisely intersects two broad surfaces representing liquidity pools within market microstructure. Its glowing line indicates high-fidelity execution and atomic settlement of digital asset derivatives, ensuring best execution and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/principals-rfq-protocol-high-fidelity-execution-digital-asset-derivatives-market-microstructure-price-discovery-alpha-generation.jpg)

The primary legal agreements are the ISDA Master Agreement, its customized Schedule, and the Credit Support Annex for collateralization.

- 
### [How Does the ISDA Master Agreement Serve to Mitigate Counterparty Risk in Institutional Trading?](https://options.greeks.live/question/how-does-the-isda-master-agreement-serve-to-mitigate-counterparty-risk-in-institutional-trading/)
![The abstract image visualizes a central Crypto Derivatives OS hub, precisely managing institutional trading workflows. Sharp, intersecting planes represent RFQ protocols extending to liquidity pools for options trading, ensuring high-fidelity execution and atomic settlement. This depicts market microstructure dynamics and capital efficiency within a secure prime brokerage environment.](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocols-for-institutional-digital-asset-derivatives-prime-os-execution.jpg)

The ISDA Master Agreement mitigates counterparty risk by creating a single legal contract for netting exposures and managing collateral.

- 
### [What Is the Role of the Credit Support Annex in an Isda Master Agreement Framework?](https://options.greeks.live/question/what-is-the-role-of-the-credit-support-annex-in-an-isda-master-agreement-framework/)
![Abstract spheres and a sharp disc depict an Institutional Digital Asset Derivatives ecosystem. A central Principal's Operational Framework interacts with a Liquidity Pool via RFQ Protocol for High-Fidelity Execution. A distinct Crypto Derivatives OS component signifies Aggregated Liquidity and Price Discovery in Market Microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-framework.jpg)

The Credit Support Annex is a contractual protocol that mitigates counterparty risk by systematizing the exchange of collateral.

- 
### [How Does Collateralization Affect CVA and Quoting Aggressiveness?](https://options.greeks.live/question/how-does-collateralization-affect-cva-and-quoting-aggressiveness/)
![Visualizes the core mechanism of an institutional-grade RFQ protocol engine, highlighting its market microstructure precision. Metallic components suggest high-fidelity execution for digital asset derivatives, enabling private quotation and block trade processing. This system minimizes slippage and optimizes price discovery for Bitcoin options.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-core-1.jpg)

Collateralization systematically reduces counterparty exposure, which lowers the CVA charge and enables more competitive derivative pricing.

- 
### [What Are the Primary Differences between English Law and New York Law CSAs?](https://options.greeks.live/question/what-are-the-primary-differences-between-english-law-and-new-york-law-csas/)
![A diagonal composition contrasts a blue intelligence layer, symbolizing market microstructure and volatility surface, with a metallic, precision-engineered execution engine. This depicts high-fidelity execution for institutional digital asset derivatives via RFQ protocols, ensuring atomic settlement.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-for-institutional-digital-asset-derivatives-execution.jpg)

The primary difference between English and New York Law CSAs is whether collateral is transferred outright or pledged as security.

- 
### [What Are the Primary Differences between an Independent Amount and Variation Margin?](https://options.greeks.live/question/what-are-the-primary-differences-between-an-independent-amount-and-variation-margin/)
![A sophisticated, illuminated device representing an Institutional Grade Prime RFQ for Digital Asset Derivatives. Its glowing interface indicates active RFQ protocol execution, displaying high-fidelity execution status and price discovery for block trades. The design suggests robust market microstructure and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/principal-rfq-engine-for-digital-asset-derivatives-best-execution-1.jpg)

Variation Margin covers current mark-to-market risk, while Independent Amount provides a buffer against potential future exposure after a default.

- 
### [How Does a Credit Support Annex Directly Reduce Counterparty Exposure in Volatile Markets?](https://options.greeks.live/question/how-does-a-credit-support-annex-directly-reduce-counterparty-exposure-in-volatile-markets/)
![A polished, light surface interfaces with a darker, contoured form on black. This signifies the RFQ protocol for institutional digital asset derivatives, embodying price discovery and high-fidelity execution. It represents dark liquidity aggregation for block trades, optimizing capital efficiency and atomic settlement within the Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-interface.jpg)

A Credit Support Annex is a protocol that systematically reduces counterparty risk by mandating collateral transfers against MTM exposure.

- 
### [How Do Threshold Amounts Mitigate the Risk of Technical Defaults?](https://options.greeks.live/question/how-do-threshold-amounts-mitigate-the-risk-of-technical-defaults/)
![Two intersecting technical arms, one opaque metallic and one transparent blue with internal glowing patterns, pivot around a central hub. This symbolizes a Principal's RFQ protocol engine, enabling high-fidelity execution and price discovery for institutional digital asset derivatives. It depicts dynamic market microstructure interactions, ensuring atomic settlement and optimizing multi-leg spread options.](https://options.greeks.live/wp-content/uploads/2025/07/principal-grade-digital-asset-derivatives-rfq-execution-engine.jpg)

Threshold amounts mitigate technical default risk by defining a precise, mutually agreed-upon trigger for collateralizing credit exposure.

- 
### [How Can a Firm Operationally Prepare for the Implementation of a New Credit Support Annex?](https://options.greeks.live/question/how-can-a-firm-operationally-prepare-for-the-implementation-of-a-new-credit-support-annex/)
![An abstract, precisely engineered construct of interlocking grey and cream panels, featuring a teal display and control. This represents an institutional-grade Crypto Derivatives OS for RFQ protocols, enabling high-fidelity execution, liquidity aggregation, and market microstructure optimization within a Principal's operational framework for digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/08/integrated-principal-trading-system-modules-for-institutional-digital-asset-derivatives-rfq-execution-and-optimized-market-microstructure.jpg)

A firm prepares for a new CSA by architecting an integrated system of legal, operational, and technological protocols to manage collateral dynamically.

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    "headline": "How Does the Isda Master Agreement Define Eligible Collateral? \u25b4 Question",
    "description": "The ISDA framework defines Eligible Collateral through the Credit Support Annex, a negotiated document specifying acceptable assets for risk mitigation. \u25b4 Question",
    "url": "https://options.greeks.live/question/how-does-the-isda-master-agreement-define-eligible-collateral/",
    "datePublished": "2025-08-13T18:24:13+00:00",
    "dateModified": "2025-08-13T18:24:14+00:00",
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        "caption": "Visually interpreting an institutional digital asset derivatives platform's core market microstructure, this image showcases a polished circular surface with a prominent blue spherical RFQ protocol engine lifting to reveal complex circuitry. Representing the computational backbone of a Prime RFQ, this system facilitates high-fidelity execution, optimal price discovery, and multi-leg spread trading for institutional block trades. Engineered for capital efficiency, it enables robust portfolio margin and systemic risk mitigation through advanced quantitative analytics for Bitcoin Options and Ethereum Futures."
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        "Counterparty Credit Risk",
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---

**Original URL:** https://options.greeks.live/question/how-does-the-isda-master-agreement-define-eligible-collateral/
