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the ISDA Master Agreement is a document outlining the terms of an over-the-counter derivatives transaction between two parties this document serves as a standard agreement in these transactions and is published by the International Swaps and Derivatives Association the ISDA Master Agreement applies to all future transactions between the two parties which means that they do not have to renegotiate the terms before entering into new transactions together nevertheless the parties can add or alter the terms of the Master Agreement by using a document called an ISDA schedule there are no exchanges or intermediaries in the over-the-counter derivatives transactions since they are conducted exclusively between the two parties the huge values and volumes in the OTC market made traders especially cautious as a way to alleviate these fears the ISDA Master Agreement was created in 1985 the ISDA Master Agreement is especially valuable in that it contains clearly worded definitions of all contract terms for both parties and the recurring transaction terms created by the agreement can save both parties considerable time and legal fees the ISDA Master Agreement is available in two versions the 1992 and 2002 documents these versions have various differences the 2002 ISDA agreement uses a closeout method whereas the 1992 version uses the market quotation loss method in calculating the closeout amount the parties agree on a fair compensation for the payments and deliveries that have or could have been earned by the terminated transactions the market quotation method has the party's review the average of quotations from leading swap market dealers and agree on a fair compensation for the early termination of the contract the 2002 revision made a reduction in grace period and added a set-off provision it also included a new termination event stipulation to account for unanticipated uncontrollable disasters such as natural or man-made catastrophes labor riots and acts of terrorism the ISDA Master Agreement is an invaluable security measure for traders dealing in over-the-counter derivatives