The part of a derivatives agreement that sets rules for collateral, including thresholds, minimum transfer amounts and eligible assets. It controls how exposure is secured.
Where you will meet it
Credit support annex comes up in 12 learning outcome notes across the FRM syllabus.
A few of them:
Exchanges and OTC Markets FRM Part I · Financial markets and products
“Mitigants include close-out netting, collateral under a credit support annex, central clearing for standard products, credit limits, rating triggers, payment-versus-payment settlement, diversification, and credit valuation adjustment priced into the trade.”
Derivatives FRM Part II · Credit risk measurement and management
“The custodian holds and values the collateral under a margin agreement such as an ISDA Credit Support Annex.”
Exchanges and OTC Markets FRM Part I · Financial markets and products
“Under a credit support annex to the ISDA master, the party whose net position is negative posts collateral, usually daily, to cover the other side's mark-to-market exposure.”
Central Clearing FRM Part I · Financial markets and products
“In bilateral clearing each pair of counterparties faces the other directly, negotiates its own collateral terms in a credit support annex under a master agreement, monitors the other's credit quality and closes out its own trades alone after a default.”
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