# Why Would a Company Prefer a Cross-Acceleration Clause in an ISDA Agreement? ▴ Question

**Published:** 2025-08-17
**Categories:** Question

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## Concept

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## A Systemic Integrity Protocol

A [Cross-Acceleration clause](https://prime.greeks.live/question/when-is-it-strategically-advantageous-to-use-an-expert-determination-clause-over-an-arbitration-clause-in-a-contract/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) within an International Swaps and Derivatives Association (ISDA) Agreement functions as a critical, system-wide integrity protocol. Its inclusion signals a company’s commitment to a transparent and stable financial posture across its entire capital structure. This provision links the performance of a specific derivatives agreement to the broader financial health of the entity, creating a unified field of [credit risk](https://prime.greeks.live/area/credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). When a company agrees to such a clause, it is effectively stating that a significant credit event in one part of its financial operations is a relevant and material event for all of its major counterparties.

It establishes a clear, unambiguous trigger ▴ the [actual acceleration](https://prime.greeks.live/question/what-are-the-primary-differences-between-actual-and-constructive-fraud-in-bankruptcy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of other significant debt. This mechanism provides a precise signal, removing the uncertainty and interpretive ambiguity that can accompany lesser default events. The preference for this clause stems from a desire for a more calibrated and deliberate approach to counterparty risk management, aligning the actions of a [derivatives counterparty](https://prime.greeks.live/question/what-are-the-key-differences-in-counterparty-risk-between-rfq-and-central-counterparty-clearing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) with the decisive actions of a company’s primary lenders.

> A cross-acceleration clause provides a clear, decisive trigger for default based on the actual acceleration of other significant debt, enhancing systemic stability.

The clause operates on a principle of consequentiality. A default on one [loan agreement](https://prime.greeks.live/area/loan-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) might be technical, temporary, or subject to a waiver. A lender choosing to formally accelerate that debt, however, is an unequivocal declaration of a serious credit issue. By tethering the [ISDA agreement](https://prime.greeks.live/area/isda-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to this momentous event, a company chooses a high threshold for triggering a derivatives default.

This preference reflects a sophisticated understanding of credit dynamics. It acknowledges that while minor defaults may occur and be resolved in the normal course of business, an acceleration of debt by another creditor is a definitive indicator of severe financial distress. This design prevents a premature and potentially value-destructive termination of derivative positions based on minor or technical breaches in other unrelated agreements. The company, in effect, insulates its [derivatives portfolio](https://prime.greeks.live/question/what-are-the-key-differences-between-stress-testing-a-crypto-portfolio-and-a-traditional-equity-portfolio/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) from the operational noise of its other financial arrangements, while remaining fully accountable for genuine, system-threatening [credit events](https://prime.greeks.live/question/how-does-idiosyncratic-volatility-differ-from-systematic-volatility-in-predicting-credit-events/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

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## The Mechanics of Interconnectivity

The operational core of a Cross-Acceleration clause is its modification of the [standard Cross-Default provision](https://prime.greeks.live/question/can-a-borrower-negotiate-a-carve-out-for-non-recourse-debt-in-a-cross-default-provision/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) found in Section 5(a)(vi) of the [ISDA Master Agreement](https://prime.greeks.live/area/isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The standard language triggers a default if other specified debt becomes merely capable of being declared due and payable. A Cross-Acceleration clause is implemented by striking this “capable of being declared” language.

This seemingly small textual change has profound operational consequences. The trigger for an [Event of Default](https://prime.greeks.live/area/event-of-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) under the ISDA agreement shifts from a potential or latent right of another lender to the lender’s actual exercise of that right.

This creates a clear, observable, and indisputable trigger event. A company preferring this structure values certainty and seeks to avoid the instability that can arise when counterparties are forced to interpret the significance of a potential [default under](https://prime.greeks.live/question/how-does-a-central-counterpartys-default-waterfall-function-during-a-member-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) a separate agreement. The clause effectively delegates the initial assessment of a default’s severity to the creditor of the other debt. That creditor, who is often a [primary lender](https://prime.greeks.live/question/what-are-the-primary-drivers-for-a-lender-to-use-a-tri-party-agent/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) with deep insight into the company’s financial state, is best positioned to judge whether a breach warrants the ultimate remedy of acceleration.

A derivatives counterparty, by contrast, may lack the complete picture. The [Cross-Acceleration](https://prime.greeks.live/area/cross-acceleration/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) clause leverages the diligence and actions of the primary lender, creating a more efficient and informed system for managing default risk across multiple, independent contracts.

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## Strategy

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## Calibrating the Default Threshold

A company’s preference for a Cross-Acceleration clause is a strategic decision to calibrate its default triggers to a higher, more meaningful threshold of financial distress. It represents a move away from a hair-trigger system, susceptible to technical or minor covenant breaches, toward a framework that responds only to decisive, material credit events. The standard [Cross-Default provision](https://prime.greeks.live/question/can-a-borrower-negotiate-a-carve-out-for-non-recourse-debt-in-a-cross-default-provision/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can be activated if a company breaches a covenant in a loan agreement, giving the lender the right to accelerate, even if that right is never exercised.

This creates a precarious situation where a derivatives counterparty could terminate its positions based on a potential default that the primary lender deems unworthy of action. This introduces a significant element of systemic fragility, where a minor, contained issue could cascade into a major liquidity event through the premature termination of essential hedging instruments.

By insisting on Cross-Acceleration, a company installs a crucial buffer. It ensures that the drastic step of terminating derivative trades can only be taken after another significant creditor has already made the grave decision to call in its loan. This aligns the interests of the derivatives counterparty with those of the company’s main lenders. It prevents a scenario where the derivatives counterparty acts on incomplete information or a different risk appetite, potentially triggering a crisis that the primary lenders were trying to avert.

This strategic calibration is particularly valuable for companies with complex debt structures and numerous covenants, where the risk of technical, non-credit-related breaches is higher. It provides operational breathing room and prevents the derivatives portfolio from becoming an unwitting amplifier of minor financial covenant issues.

> Opting for cross-acceleration strategically aligns a company’s derivatives default triggers with the more consequential actions of its primary lenders, preventing premature terminations.

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## Comparative Analysis of Default Triggers

The strategic value of Cross-Acceleration becomes evident when compared directly with the [standard Cross-Default](https://prime.greeks.live/question/can-a-default-on-a-subsidiarys-debt-trigger-a-cross-default-event-for-the-parent-company/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) provision. Each clause represents a different philosophy on the management of [counterparty credit risk](https://prime.greeks.live/area/counterparty-credit-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and the appropriate level of sensitivity for a default trigger.

| Provision Feature | Standard Cross-Default | Cross-Acceleration |
| --- | --- | --- |
| Trigger Event | Specified Indebtedness becomes capable of being declared due and payable. | Specified Indebtedness is actually accelerated by the third-party creditor. |
| Sensitivity Level | High. Sensitive to technical defaults, covenant breaches, and potential issues. | Lower. Insensitive to events that do not lead to actual acceleration. |
| Systemic Impact | Can amplify minor issues, creating a “domino effect” from a non-material breach. | Acts as a circuit breaker, responding only to confirmed, severe credit events. |
| Counterparty Discretion | Requires the derivatives counterparty to interpret the severity of a third-party default. | Relies on the judgment and action of the third-party creditor. |
| Negotiating Posture | Favored by parties seeking maximum protection and early warning signs. | Favored by companies seeking stability and protection from premature close-outs. |

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## Fortifying against Systemic Fragility

The adoption of a Cross-Acceleration clause is a direct strategy to fortify a company’s financial structure against systemic fragility. In a complex web of financial agreements, the interconnectedness of default clauses can create unforeseen contagion paths. A standard Cross-Default clause can act as a potent vector for this contagion.

A minor operational error leading to a temporary [covenant breach](https://prime.greeks.live/question/how-does-an-integrated-system-architecture-improve-covenant-breach-detection-speed/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in one loan agreement could, in theory, give a derivatives counterparty the right to terminate all its trades, demanding a potentially massive termination payment at the most inopportune time. This creates a “twitchy trigger finger” environment where all parties are incentivized to act preemptively, escalating a manageable situation into a full-blown crisis.

Cross-Acceleration mitigates this risk by requiring a definitive, public, and severe action ▴ the acceleration of debt ▴ before the contagion can spread to the derivatives portfolio. This serves several strategic functions:

- **Reduces False Positives** ▴ It filters out the noise of technical or minor defaults that are often waived or cured without impacting the company’s actual ability to perform its obligations.

- **Enhances Predictability** ▴ It creates a clear and predictable environment for all parties. The company knows that only a genuine credit crisis will jeopardize its hedging program, and counterparties know precisely what event to monitor.

- **Preserves Relationship Equity** ▴ It avoids contentious disputes where a derivatives counterparty terminates trades based on a third-party event that the company believes is immaterial. By waiting for the primary lender to act, the clause grounds the decision in the actions of a party with significant and primary financial exposure.

This strategic choice reflects a mature approach to risk management, one that prioritizes the stability of the overall financial system over the ability to react to every potential sign of trouble. It is a calculated decision that a less sensitive, more deliberate trigger ultimately creates a more resilient and robust operational framework.

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## Execution

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## Negotiating the Clause and Thresholds

The execution of a Cross-Acceleration strategy begins at the negotiating table for the ISDA Schedule. This is where the standard language of the [Master Agreement](https://prime.greeks.live/question/how-does-the-isda-master-agreements-single-agreement-clause-function-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is customized. The primary operational step is the amendment of Section 5(a)(vi), the Cross-Default provision. The key modification involves the deletion of the phrase “or becoming capable at such time of [being declared](https://prime.greeks.live/question/what-is-the-single-most-important-clause-to-prevent-an-rfp-from-being-legally-binding/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” from subsection (1).

This transforms the clause from a Cross-Default to a Cross-Acceleration provision. However, the negotiation does not end there. A critical component of this clause is the “[Threshold Amount](https://prime.greeks.live/area/threshold-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).” This is the minimum amount of [Specified Indebtedness](https://prime.greeks.live/area/specified-indebtedness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) that must be accelerated to trigger the Event of Default under the ISDA.

Setting this threshold is a crucial quantitative exercise. A company will advocate for a higher threshold to ensure that only truly significant credit events will trigger the clause. The counterparty will argue for a lower threshold to provide greater protection. The final amount is a product of negotiation that reflects the company’s creditworthiness, the nature of its business, and the size of the derivatives portfolio.

For large corporations, this amount might be a fixed number in the tens or hundreds of millions of dollars. For investment funds, it is often expressed as a percentage of Net Asset Value (NAV), typically in the range of 3-5%.

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## Procedural Checklist for Implementation

Successfully implementing a Cross-Acceleration clause requires a detailed, systematic approach during the ISDA negotiation phase. The following steps outline a robust operational process:

- **Initial Assessment** ▴ The company’s legal and treasury teams must first analyze the existing debt portfolio to identify all agreements containing acceleration clauses. This provides a clear picture of the potential events that could trigger the Cross-Acceleration clause.

- **Clause Modification** ▴ Propose precise amendments to Section 5(a)(vi) of the ISDA Master Agreement. This involves providing redline text that clearly strikes the “capable of being declared” language, leaving only the trigger of actual acceleration.

- **Threshold Amount Calculation** ▴ Develop a data-driven proposal for the Threshold Amount. This should be based on an analysis of the company’s balance sheet, total indebtedness, and NAV (if applicable). The proposal should be high enough to avoid triggers from minor credit facilities but low enough to be commercially acceptable to the counterparty.

- **Definition Of Specified Indebtedness** ▴ Scrutinize and, if necessary, negotiate the definition of “Specified Indebtedness.” A company may seek to narrow this definition to exclude certain types of obligations, such as non-recourse debt or contingent obligations, to further refine the trigger’s precision.

- **Valuation Of Derivative Liabilities** ▴ When Specified Indebtedness is expanded to include other derivative transactions, it is critical to specify the methodology for valuing these positions to determine if the Threshold Amount has been breached. Agreeing on a clear valuation source (e.g. market quotation, model price) prevents disputes at the time of a potential default.

- **Final Documentation** ▴ Ensure that all negotiated terms are accurately reflected in the final executed ISDA Schedule. This includes the modified Cross-Default language, the agreed-upon Threshold Amount, and any amendments to the definition of Specified Indebtedness.

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## Predictive Scenario Analysis

Consider a hypothetical multinational corporation, “Global Corp,” with a complex capital structure. Global Corp has a $5 billion syndicated revolving credit facility, various series of public bonds totaling $10 billion, and an extensive derivatives portfolio governed by ISDA agreements to hedge its currency and interest rate risks. The ISDA agreements are with several major banks. Global Corp’s treasury team has prudently negotiated Cross-Acceleration clauses in all its ISDAs with a Threshold Amount of $150 million.

One of Global Corp’s international subsidiaries experiences a localized operational failure, causing a breach of a financial covenant in a smaller, $50 million bilateral loan agreement with a regional bank. Under the terms of this loan, the regional bank now has the right to accelerate the loan and demand immediate repayment. However, the bank, after reviewing the situation, recognizes it as a temporary and contained issue. They understand that Global Corp as a whole remains financially sound and decide to issue a waiver for the covenant breach rather than accelerate the loan.

> A well-defined cross-acceleration clause acts as a firewall, preventing localized, non-critical defaults from triggering a catastrophic, system-wide failure of a company’s hedging program.

In this scenario, the execution of the Cross-Acceleration strategy proves its immense value. Had Global Corp’s ISDA agreements contained standard Cross-Default clauses, the moment the covenant was breached, the $50 million loan would have become “capable of being declared” due and payable. Even though this amount is below the Threshold Amount, it could have created a Potential Event of Default, causing uncertainty and potentially requiring disclosure to its derivatives counterparties.

If the loan had been for an amount greater than $150 million, a standard Cross-Default clause would have immediately triggered an Event of Default under the ISDAs, allowing the banks to terminate all of Global Corp’s vital hedges. This would have occurred despite the primary lender’s decision that acceleration was unnecessary and counterproductive.

Because Global Corp had a Cross-Acceleration clause, nothing happens at the ISDA level. The regional bank’s decision not to accelerate is the determinative factor. The derivatives counterparties are not triggered to act. The temporary operational issue remains contained and does not cascade into a potentially devastating liquidity crisis for Global Corp.

The company’s hedging program remains intact, allowing it to manage its market risks as intended, while it resolves the localized issue with the regional bank. This illustrates the clause’s function as a critical firewall, protecting the stability of the company’s core financial architecture.

| Scenario Event | Impact Under Standard Cross-Default (Threshold ▴ $150M) | Impact Under Cross-Acceleration (Threshold ▴ $150M) |
| --- | --- | --- |
| Covenant Breach on $50M Loan | Potential Event of Default may occur. Creates uncertainty and reporting obligations. | No impact. The loan was not accelerated. |
| Covenant Breach on $200M Loan; Lender issues waiver | Technical Event of Default occurs as debt is “capable of being accelerated.” Counterparties could terminate trades. | No impact. The lender’s waiver means no acceleration occurred. |
| Payment Default on $200M Loan; Lender accelerates debt | Event of Default. Counterparties can terminate trades. | Event of Default. Counterparties can terminate trades. |
| Operational error causes late payment on $175M bond coupon (cured within grace period) | Potential Event of Default during the grace period. High risk of premature termination. | No impact. The debt was never accelerated. |

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## References

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

- 
Gregory, Jon. “The xVA Challenge ▴ Counterparty Credit Risk, Funding, Collateral, and Capital.” Fourth Edition, Wiley Finance, 2020.

- 
Harding, Paul C. “Mastering the ISDA Master Agreements ▴ A Practical Guide for Negotiation.” Financial Times/Prentice Hall, 2010.

- 
Mengle, David. “ISDA Master Agreement ▴ A Practical Guide.” Practising Law Institute, 2011.

- 
Johnson, R.D. and S.L. Schwarcz. “Rethinking the Cross-Default Provision.” Business Lawyer, vol. 56, no.
3, 2001, pp. 917-941.

- 
Flavell, Richard. “Swaps and Other Derivatives.” Second Edition, John Wiley & Sons, 2009.

- 
Bommarito, Michael J. and Daniel M. Katz. “A Mathematical Approach to the Study of the ISDA Master Agreement.” University of Michigan Law School, Program in Law and Economics, Paper No. 11-002, 2011.

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## Reflection

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## The Architecture of Resilience

The decision to integrate a Cross-Acceleration clause into a company’s foundational financial documents transcends mere legal negotiation. It is a statement of architectural intent. It reflects a deep understanding that true financial resilience is not achieved by creating the most sensitive alert system, but by designing a system that can distinguish between localized tremors and seismic events. The clause functions as a carefully calibrated shock absorber, ensuring that the entire structure does not collapse because of a failure in a single, non-critical component.

As you review your own operational framework, the essential question becomes ▴ are your contractual protocols designed to merely react, or are they engineered to endure? The answer determines the fundamental stability of your enterprise in a complex and interconnected financial world.

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## Glossary

<a href="https://prime.greeks.live/question/when-is-it-strategically-advantageous-to-use-an-expert-determination-clause-over-an-arbitration-clause-in-a-contract/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Cross-Acceleration Clause

Expert determination is a contractually-defined protocol for swift, final resolution of technical issues by a subject-matter specialist. </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">
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## 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/what-are-the-key-differences-in-counterparty-risk-between-rfq-and-central-counterparty-clearing/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Derivatives Counterparty

RFQ risk is a direct, bilateral liability; CCP risk is a standardized, mutualized obligation managed by a central guarantor. </a><a href="https://prime.greeks.live/question/what-are-the-primary-differences-between-actual-and-constructive-fraud-in-bankruptcy/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Actual Acceleration

Actual fraud requires proof of intent to deceive, while constructive fraud hinges on the transaction's financial imbalance. </a><a href="https://prime.greeks.live/area/isda-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A balanced blue semi-sphere rests on a horizontal bar, poised above diagonal rails, reflecting its form below. This symbolizes the precise atomic settlement of a block trade within an RFQ protocol, showcasing high-fidelity execution and capital efficiency in institutional digital asset derivatives markets, managed by a Prime RFQ with minimal slippage](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-6.jpg)

## Isda Agreement

Meaning ▴ The ISDA Master Agreement represents a foundational contractual framework for over-the-counter (OTC) derivatives transactions, establishing a standardized set of terms that govern all individual trades executed between two counterparties. </a><a href="https://prime.greeks.live/area/loan-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent institutional-grade platform reveals its RFQ execution engine with radiating intelligence layer pathways. Central price discovery mechanisms and liquidity pool access points are flanked by pre-trade analytics modules for digital asset derivatives and multi-leg spreads, ensuring high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-core-platform.jpg)

## Loan Agreement

Meaning ▴ A Loan Agreement constitutes a formal, legally binding contractual instrument delineating the terms and conditions under which one party, the lender, extends a sum of capital to another party, the borrower, with a specified obligation for repayment. </a><a href="https://prime.greeks.live/question/what-are-the-key-differences-between-stress-testing-a-crypto-portfolio-and-a-traditional-equity-portfolio/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Stacked modular components with a sharp fin embody Market Microstructure for Digital Asset Derivatives. This represents High-Fidelity Execution via RFQ protocols, enabling Price Discovery, optimizing Capital Efficiency, and managing Gamma Exposure within an Institutional Prime RFQ for Block Trades](https://options.greeks.live/wp-content/uploads/2025/07/modular-system-for-institutional-digital-asset-derivatives-rfq-protocol-optimization.jpg)

## Derivatives Portfolio

Stress-testing a crypto portfolio requires modeling technology-driven, systemic failure modes, while equity stress tests focus on economic and historical precedents. </a><a href="https://prime.greeks.live/question/how-does-idiosyncratic-volatility-differ-from-systematic-volatility-in-predicting-credit-events/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered RFQ protocol engine, its central teal sphere signifies high-fidelity execution for digital asset derivatives. This module embodies a Principal's dedicated liquidity pool, facilitating robust price discovery and atomic settlement within optimized market microstructure, ensuring best execution](https://options.greeks.live/wp-content/uploads/2025/08/institutional-rfq-engine-for-digital-asset-derivatives-best-execution.jpg)

## Credit Events

Disaggregating equity volatility into systematic and firm-specific components provides a superior predictive signal for credit event modeling. </a><a href="https://prime.greeks.live/question/can-a-borrower-negotiate-a-carve-out-for-non-recourse-debt-in-a-cross-default-provision/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometry illustrates interconnected institutional trading pathways. Intersecting metallic elements converge at a central hub, symbolizing a liquidity pool or RFQ aggregation point for high-fidelity execution of digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-cross-market-microstructure-for-digital-asset-derivatives.jpg)

## Standard Cross-Default Provision

A borrower can negotiate a non-recourse carve-out in a cross-default clause to isolate asset risk, a key move in sophisticated financing. </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">
![A robust, dark metallic platform, indicative of an institutional-grade execution management system. Its precise, machined components suggest high-fidelity execution for digital asset derivatives via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-platform-high-fidelity-price-discovery-and-atomic-settlement-infrastructure.jpg)

## 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/event-of-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A dark, articulated multi-leg spread structure crosses a simpler underlying asset bar on a teal Prime RFQ platform. This visualizes institutional digital asset derivatives execution, leveraging high-fidelity RFQ protocols for optimal capital efficiency and precise price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-prime-os-execution.jpg)

## Event of Default

Meaning ▴ An Event of Default signifies a specific breach of contract or covenant by one party in a financial agreement, typically triggering pre-defined remedies for the non-defaulting party. </a><a href="https://prime.greeks.live/question/what-are-the-primary-drivers-for-a-lender-to-use-a-tri-party-agent/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, futuristic institutional grade platform with a translucent teal dome signifies a secure environment for private quotation and high-fidelity execution. A dark, reflective sphere represents an intelligence layer for algorithmic trading and price discovery within market microstructure, ensuring capital efficiency for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-rfq-execution-for-institutional-digital-asset-derivatives-1.jpg)

## Primary Lender

A lender uses a tri-party agent to systematize collateral management, mitigating risk and unlocking operational scale. </a><a href="https://prime.greeks.live/question/how-does-a-central-counterpartys-default-waterfall-function-during-a-member-default/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract geometric representation of an institutional RFQ protocol for digital asset derivatives. Two distinct segments symbolize cross-market liquidity pools and order book dynamics](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-protocol-2.jpg)

## Default Under

A CCP's default waterfall is a pre-ordained, sequential liquidation of financial guarantees designed to neutralize a member failure and preserve market continuity. </a><a href="https://prime.greeks.live/area/cross-acceleration/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sharp, metallic blue instrument with a precise tip rests on a light surface, suggesting pinpoint price discovery within market microstructure. This visualizes high-fidelity execution of digital asset derivatives, highlighting RFQ protocol efficiency](https://options.greeks.live/wp-content/uploads/2025/07/precision-digital-asset-derivative-rfq-execution-market-microstructure-high-fidelity-alpha-generation-prime-os-system.jpg)

## Cross-Acceleration

Meaning ▴ Cross-Acceleration is a contractual clause within institutional digital asset derivatives agreements, stipulating that a default event occurring under one agreement between two parties automatically triggers a default across all other distinct agreements with the same counterparty, even if those agreements are not independently in default. </a><a href="https://prime.greeks.live/question/can-a-borrower-negotiate-a-carve-out-for-non-recourse-debt-in-a-cross-default-provision/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, bimodal digital asset derivatives execution interface, partially open, revealing a dark, secure internal structure. This symbolizes high-fidelity execution and strategic price discovery via institutional RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocols-price-discovery.jpg)

## Cross-Default Provision

A borrower can negotiate a non-recourse carve-out in a cross-default clause to isolate asset risk, a key move in sophisticated financing. </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">
![The image features layered structural elements, representing diverse liquidity pools and market segments within a Principal's operational framework. A sharp, reflective plane intersects, symbolizing high-fidelity execution and price discovery via private quotation protocols for institutional digital asset derivatives, emphasizing atomic settlement nodes](https://options.greeks.live/wp-content/uploads/2025/07/systemic-interplay-for-institutional-digital-asset-derivatives-execution-via-advanced-rfq-protocols.jpg)

## 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/can-a-default-on-a-subsidiarys-debt-trigger-a-cross-default-event-for-the-parent-company/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two distinct components, beige and green, are securely joined by a polished blue metallic element. This embodies a high-fidelity RFQ protocol for institutional digital asset derivatives, ensuring atomic settlement and optimal liquidity](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-for-digital-asset-derivatives-high-fidelity-link.jpg)

## Standard Cross-Default

A subsidiary's default can trigger a parent's cross-default, a risk defined and managed by the precise language of debt covenants. </a><a href="https://prime.greeks.live/question/how-does-an-integrated-system-architecture-improve-covenant-breach-detection-speed/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A translucent teal dome, brimming with luminous particles, symbolizes a dynamic liquidity pool within an RFQ protocol. Precisely mounted metallic hardware signifies high-fidelity execution and the core intelligence layer for institutional digital asset derivatives, underpinned by granular market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-core-intelligence-layer.jpg)

## Covenant Breach

An integrated architecture accelerates covenant breach detection by unifying disparate data into a real-time analytical fabric. </a><a href="https://prime.greeks.live/question/how-does-the-isda-master-agreements-single-agreement-clause-function-in-practice/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic cylindrical component, suggesting robust Prime RFQ infrastructure, interacts with a luminous teal-blue disc representing a dynamic liquidity pool for digital asset derivatives. A precise golden bar diagonally traverses, symbolizing an RFQ-driven block trade path, enabling high-fidelity execution and atomic settlement within complex market microstructure for institutional grade operations](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-protocols-navigating-digital-asset-derivatives-market-microstructure-for-optimal-block-trade-liquidity.jpg)

## Master Agreement

The ISDA's Single Agreement clause is a legal protocol that unifies all transactions into one contract to enable enforceable close-out netting. </a><a href="https://prime.greeks.live/question/what-is-the-single-most-important-clause-to-prevent-an-rfp-from-being-legally-binding/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated dark-hued institutional-grade digital asset derivatives platform interface, featuring a glowing aperture symbolizing active RFQ price discovery and high-fidelity execution. The integrated intelligence layer facilitates atomic settlement and multi-leg spread processing, optimizing market microstructure for prime brokerage operations and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/institutional-crypto-derivatives-rfq-engine-intelligence-layer.jpg)

## Being Declared

A clause explicitly stating the RFP is not an offer and no contract exists until a definitive agreement is signed. </a><a href="https://prime.greeks.live/area/specified-indebtedness/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Modular institutional-grade execution system components reveal luminous green data pathways, symbolizing high-fidelity cross-asset connectivity. This depicts intricate market microstructure facilitating RFQ protocol integration for atomic settlement of digital asset derivatives within a Principal's operational framework, underpinned by a Prime RFQ intelligence layer](https://options.greeks.live/wp-content/uploads/2025/07/modular-high-fidelity-execution-architecture-for-institutional-digital-asset-derivatives-rfq-protocol-integration-and-principals-operational-framework-optimization.jpg)

## Specified Indebtedness

Meaning ▴ Specified Indebtedness refers to a precisely defined set of financial obligations or liabilities, subject to explicit terms and conditions within a contractual agreement, typically serving as the basis for collateralization, netting, or default event triggers. </a><a href="https://prime.greeks.live/area/threshold-amount/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, domed control module, light green to deep blue, on a textured grey base, signifies precision. This represents a Principal's Prime RFQ for institutional digital asset derivatives, enabling high-fidelity execution via RFQ protocols, optimizing price discovery, and enhancing capital efficiency within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/precision-control-for-institutional-digital-asset-rfq-execution.jpg)

## Threshold Amount

Meaning ▴ A Threshold Amount represents a pre-configured numerical determinant within a computational system, signaling the activation or deactivation of a specific protocol, policy, or operational state upon being met or exceeded. </a>

**Tags:** [Financial Covenants](https://options.greeks.live/area/financial-covenants/), [Credit Risk Management](https://options.greeks.live/area/credit-risk-management/), [ISDA Master Agreement](https://options.greeks.live/area/isda-master-agreement/), [Loan Agreement](https://options.greeks.live/area/loan-agreement/), [Threshold Amount](https://options.greeks.live/area/threshold-amount/), [ISDA Schedule Negotiation](https://options.greeks.live/area/isda-schedule-negotiation/)	

## Discover More

- 
### [Why Is a Single Agreement Architecture a Prerequisite for Effective Cross Product Netting?](https://options.greeks.live/question/why-is-a-single-agreement-architecture-a-prerequisite-for-effective-cross-product-netting/)
![A crystalline geometric structure, symbolizing precise price discovery and high-fidelity execution, rests upon an intricate market microstructure framework. This visual metaphor illustrates the Prime RFQ facilitating institutional digital asset derivatives trading, including Bitcoin options and Ethereum futures, through RFQ protocols for block trades with minimal slippage.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution.jpg)

A single agreement architecture is the legal operating system that consolidates myriad exposures into one nettable obligation.

- 
### [How Does Collateralization Interact with the Single Agreement Concept in a Default?](https://options.greeks.live/question/how-does-collateralization-interact-with-the-single-agreement-concept-in-a-default/)
![Abstractly depicting an Institutional Digital Asset Derivatives ecosystem. A robust base supports intersecting conduits, symbolizing multi-leg spread execution and smart order routing. Floating spheres represent diverse liquidity pools and crypto derivatives, emphasizing market microstructure and capital efficiency via RFQ protocols.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-engine-optimization.jpg)

The single agreement unifies all trades into one contract, enabling collateral to secure the resulting net exposure upon default.

- 
### [What Are the Key Differences in Risk between Bilateral Netting and Multilateral Netting?](https://options.greeks.live/question/what-are-the-key-differences-in-risk-between-bilateral-netting-and-multilateral-netting/)
![Abstract geometric planes in teal, navy, and grey intersect. A central beige object, symbolizing a precise RFQ inquiry, passes through a teal anchor, representing High-Fidelity Execution within Institutional Digital Asset Derivatives. This depicts optimal Price Discovery and Liquidity Aggregation.](https://options.greeks.live/wp-content/uploads/2025/07/rfq-protocols-for-digital-asset-derivatives-high-fidelity-execution-liquidity-aggregation-price-discovery-market-microstructure.jpg)

Bilateral netting decentralizes risk to individual counterparties, whereas multilateral netting centralizes and mutualizes risk through a CCP.

- 
### [What Are the Data Requirements for Building an Effective Counterparty Risk Network Model?](https://options.greeks.live/question/what-are-the-data-requirements-for-building-an-effective-counterparty-risk-network-model/)
![A complex abstract digital rendering depicts intersecting geometric planes and layered circular elements, symbolizing a sophisticated RFQ protocol for institutional digital asset derivatives. The central glowing network suggests intricate market microstructure and price discovery mechanisms, ensuring high-fidelity execution and atomic settlement within a prime brokerage framework for capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-5.jpg)

An effective counterparty risk model requires a unified data architecture to map and simulate systemic financial contagion.

- 
### [How Do Cross-Default Provisions in Master Agreements Amplify or Mitigate Systemic Risk?](https://options.greeks.live/question/how-do-cross-default-provisions-in-master-agreements-amplify-or-mitigate-systemic-risk/)
![Reflective and circuit-patterned metallic discs symbolize the Prime RFQ powering institutional digital asset derivatives. This depicts deep market microstructure enabling high-fidelity execution through RFQ protocols, precise price discovery, and robust algorithmic trading within aggregated liquidity pools.](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-architecture-driving-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-liquidity-and-best-execution.jpg)

Cross-default provisions are systemic circuit breakers, capable of isolating failure through netting or amplifying contagion when miscalibrated.

- 
### [What Are the Primary Differences between a CCP Default Waterfall and a Bilateral Close-Out?](https://options.greeks.live/question/what-are-the-primary-differences-between-a-ccp-default-waterfall-and-a-bilateral-close-out/)
![The image features layered structural elements, representing diverse liquidity pools and market segments within a Principal's operational framework. A sharp, reflective plane intersects, symbolizing high-fidelity execution and price discovery via private quotation protocols for institutional digital asset derivatives, emphasizing atomic settlement nodes.](https://options.greeks.live/wp-content/uploads/2025/07/systemic-interplay-for-institutional-digital-asset-derivatives-execution-via-advanced-rfq-protocols.jpg)

A CCP Default Waterfall is a mutualized, pre-funded systemic defense, while a Bilateral Close-Out is a contractual, localized risk termination.

- 
### [What Are the Key Negotiable Terms within an ISDA Credit Support Annex?](https://options.greeks.live/question/what-are-the-key-negotiable-terms-within-an-isda-credit-support-annex/)
![A sleek, angular Prime RFQ interface component featuring a vibrant teal sphere, symbolizing a precise control point for institutional digital asset derivatives. This represents high-fidelity execution and atomic settlement within advanced RFQ protocols, optimizing price discovery and liquidity across complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-control-point.jpg)

The key negotiable terms of an ISDA CSA are the parameters that control the timing, amount, and type of collateral exchanged to mitigate bilateral risk.

- 
### [How Does a Credit Support Annex Mitigate Counterparty Risk in RFQ Trades?](https://options.greeks.live/question/how-does-a-credit-support-annex-mitigate-counterparty-risk-in-rfq-trades/)
![Intersecting metallic structures symbolize RFQ protocol pathways for institutional digital asset derivatives. They represent high-fidelity execution of multi-leg spreads across diverse liquidity pools. Spheres denote aggregated inquiry and price discovery within a robust Prime RFQ, optimizing capital efficiency and mitigating systemic risk.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-framework-optimizing-multi-leg-spreads-and-liquidity-aggregation-for-best-execution.jpg)

A Credit Support Annex codifies a dynamic collateral exchange protocol, transforming unsecured counterparty risk into a managed, secured exposure.

- 
### [Can the Customization Benefits of Bilateral Trades Ever Outweigh Their Inherent Systemic Risks?](https://options.greeks.live/question/can-the-customization-benefits-of-bilateral-trades-ever-outweigh-their-inherent-systemic-risks/)
![Precision-engineered multi-layered architecture depicts institutional digital asset derivatives platforms, showcasing modularity for optimal liquidity aggregation and atomic settlement. This visualizes sophisticated RFQ protocols, enabling high-fidelity execution and robust pre-trade analytics.](https://options.greeks.live/wp-content/uploads/2025/08/modular-digital-asset-derivative-prime-os-for-institutional-rfq-and-block-trade-execution.jpg)

Bespoke trade benefits outweigh systemic risks only when managed by a superior, integrated operational and legal architecture.

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---

**Original URL:** https://options.greeks.live/question/why-would-a-company-prefer-a-cross-acceleration-clause-in-an-isda-agreement/
