© 2001

Design of Master Agreements for OTC Derivatives


Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 494)

Table of contents

  1. Front Matter
    Pages I-VIII
  2. Dietmar Franzen
    Pages 1-5
  3. Dietmar Franzen
    Pages 7-44
  4. Dietmar Franzen
    Pages 45-79
  5. Dietmar Franzen
    Pages 141-155
  6. Dietmar Franzen
    Pages 157-161
  7. Back Matter
    Pages 163-179

About this book


I first came across the issue of derivatives documentation when writing my diploma thesis on measuring the credit risk ofOTC derivatives while I was an economics student at the University of Bonn. Despite the fact that security design has been an area of research in economics for many years and despite the widespread use of derivatives documentation in financial practice, the task of designing contracts for derivatives transactions has not been dealt with in financial theory. The one thing that aroused my curiosity was that two parties with usually opposing interests, namely banking supervisors and the banking industry's lobby, unanimously endorse the use ofcertain provisions in standardized contracts called master agreements. Do these provisions increase the ex ante efficiency of contracts for all parties involved? I actually began my research expecting to find support for the widely held beliefs about the efficiency or inefficiency of certain provisions and was sur­ prised to obtain results that contradicted the conventional wisdom. I would strongly advise against using these results in any political debate on deriva­ tives documentation. They were obtained within a highly stylized model with some restrictive assumptions. This work should rather be seen as an attempt to formalize the discussion on derivatives documentation and to challenge the notion that certain provisions are generally ex ante efficient. It is also an invitation to all those advocating the use of certain provisions in master agreements to formalize their arguments and to explain the economic ratio­ nale behind these provisions.


Derivate Derivatives Design Derivatives Documentation Finanzierung Finanzierungstheorie Incomplete Contracts Konkurs Kredit Kreditrisiko Security bargaining credit risk derivatives

Authors and affiliations

  1. 1.MünchenGermany

Bibliographic information

  • Book Title Design of Master Agreements for OTC Derivatives
  • Authors Dietmar Franzen
  • Series Title Lecture Notes in Economics and Mathematical Systems
  • DOI
  • Copyright Information Springer-Verlag Berlin Heidelberg 2001
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Springer Book Archive
  • Softcover ISBN 978-3-540-67934-9
  • eBook ISBN 978-3-642-56932-6
  • Series ISSN 0075-8442
  • Edition Number 1
  • Number of Pages VIII, 184
  • Number of Illustrations 0 b/w illustrations, 0 illustrations in colour
  • Topics Finance, general
    Quantitative Finance
  • Buy this book on publisher's site
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