For
Immediate Release Wednesday, June 7, 2006
For More Information, Please
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ISDA Publishes
Documentation for CDS on CDOs
The CDS on CDO template is similarly structured to the
template for credit default swaps on asset-backed securities (CDS on ABS) with a
Pay As You Go (PAUG) approach, published
in June 2005, for contracts referencing CMBS and RMBS underliers. A key
difference between the mechanics of the two templates is that the CDS on CDO
template addresses implied write-downs, whereby a drop in the asset value of
the underlying necessitates an adjustment in the collateralization.
ISDA also announced today that it has
published a revised template for a Credit Derivative Transaction on
Asset-Backed Security with Cash or Physical Settlement which was originally
published on June 13, 2005. The working group has developed revisions to
that template in the form of an additional mechanism for settlement, i.e.: delivery
of a total return swap. The revised CDS on ABS Cash or Physical
Settlement form supersedes the June 13, 2005 publication.
“Providing standardized documentation for
this important underlying asset class will assist growth, liquidity and price
transparency in the sector, as we saw with ISDA’s earlier offerings in the CDS
on ABS space.” said
About ISDA
ISDA,
which represents participants in the privately negotiated derivatives industry,
is the largest global financial trade association, by number of member firms.
ISDA was chartered in 1985, and today has approximately 700 member institutions from 50 countries on six continents.
These members include most of the world's major institutions that deal in
privately negotiated derivatives, as well as many of the businesses,
governmental entities and other end users that rely on over-the-counter
derivatives to manage efficiently the financial market risks inherent in their
core economic activities. Information
about ISDA and its activities is available on the Association's web site: www.isda.org.