Template:Isda giveup: Difference between revisions
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[[ISDA give-up]]s only work if what you are purporting to [[give up]] is itself an ISDA {{isdaprov|Transaction}} — an not a ''hedge'' to an ISDA {{isdaprov|Transaction}} (unless it is, itself, an ISDA {{isdaprov|Transaction}}). [[ISDA give-up]]s are therefore most frequently spotted in [[credit derivatives]], interest rates and cross currency swaps. [[Equity derivatives]], on the other hand, tend to be hedged by physical assets (i.e., shares), so you wouldn’t use an [[ISDA give-up]] to settle a [[synthetic equity]] trade, for example. | [[ISDA give-up]]s only work if what you are purporting to [[give up]] is itself an ISDA {{isdaprov|Transaction}} — an not a ''hedge'' to an ISDA {{isdaprov|Transaction}} (unless it is, itself, an ISDA {{isdaprov|Transaction}}). [[ISDA give-up]]s are therefore most frequently spotted in [[credit derivatives]], interest rates and cross currency swaps. [[Equity derivatives]], on the other hand, tend to be hedged by physical assets (i.e., shares), so you wouldn’t use an [[ISDA give-up]] to settle a [[synthetic equity]] trade, for example. | ||
Under the [[2005 ISDA Master Give-Up Agreement]], a fund may “give up” [[derivatives]] it has traded with a [[broker]] to its | Under the [[2005 ISDA Master Give-Up Agreement]], a fund may “give up” [[derivatives]] it has traded with a [[broker]] to its [[Prime broker]]. It will usually do this because it does not have an {{isdama}} with the [[broker]]. Under this arrangement the [[hedge fund]] acts at all times as the [[Prime broker|prime broker’s]] [[agent]] (it may not be a client of the [[executing broker]] at all) and never creates its own principal contract with the executing broker, but simply arranges the contract between the [[executing broker]] and the prime broker. The [[PB]] then puts on a back-to-back trade with the [[HF]] under the {{isdama}} between them. Net result: the PB intermediates between [[EB]] and [[HF]]. Calling this arrangement a “give-up” is something of a misnomer. | ||
Latest revision as of 13:30, 14 August 2024
ISDA give-ups only work if what you are purporting to give up is itself an ISDA Transaction — an not a hedge to an ISDA Transaction (unless it is, itself, an ISDA Transaction). ISDA give-ups are therefore most frequently spotted in credit derivatives, interest rates and cross currency swaps. Equity derivatives, on the other hand, tend to be hedged by physical assets (i.e., shares), so you wouldn’t use an ISDA give-up to settle a synthetic equity trade, for example.
Under the 2005 ISDA Master Give-Up Agreement, a fund may “give up” derivatives it has traded with a broker to its Prime broker. It will usually do this because it does not have an ISDA Master Agreement with the broker. Under this arrangement the hedge fund acts at all times as the prime broker’s agent (it may not be a client of the executing broker at all) and never creates its own principal contract with the executing broker, but simply arranges the contract between the executing broker and the prime broker. The PB then puts on a back-to-back trade with the HF under the ISDA Master Agreement between them. Net result: the PB intermediates between EB and HF. Calling this arrangement a “give-up” is something of a misnomer.