USE OF ISDA DEFINITIONS: OVERVIEW OF THE 2000 ISDA DEFINITIONS USE OF ISDA DEFINITIONS: OVERVIEW OF THE 2000 ISDA DEFINITIONS August 6, 2002 Emilio Jiménez Vice President and Assistant General Counsel JPMorgan Chase Bank

ISDA Agreement Structure 1992 Master Agreement (Multicurrency - Cross Border or Local Currency - Single Jurisdiction) Contains basic legal, credit and mechanical terms Incorporates Confirmations Schedule used to make elections, changes and additions to standard provisions Confirmations  Incorporate Definitions  Specify economic terms of each Transaction  Include Transaction-specific modifications Credit Support Document(s) 2 Definitions

3 ISDA Definitions Booklets in Current Use 1992 ISDA Municipal Counterparty Definitions 1993 Commodity Derivatives Definitions 1996 Equity Derivatives Definitions 1997 Government Bond Option Definitions 1997 Bullion Definitions 1998 FX and Currency Option Definitions 1998 Euro Definitions 1999 Credit Derivatives Definition 2000 ISDA Definitions –Annex –NCU Supplement

4 General Aims of ISDA Definitions Codify market practices and conventions Implementation of standard terminology Promote operational efficiency and ease of execution Ease of comparison Avoid “battle of the forms”

5 Background and purpose of 2000 ISDA Definitions Purpose: Provide framework for documentation of interest rate and currency derivative transactions –Consolidates 1991 ISDA Definitions, 1998 ISDA Supplement, portions of 1998 Euro Definitions –No longer includes terms for products defined in other definition booklets

ISDA Definitions Structure 2000 ISDA Definitions booklet –Exhibits (sample confirmations) Annex to the 2000 ISDA Definitions –Annex forms part of 2000 ISDA Definitions

ISDA Definitions Product Coverage Interest rate swaps Basis swaps Interest rate caps Interest rate floors Interest rate collars Currency Swaps Cross-Currency Rate Swaps Swaptions Forward Rate Agreements Customized Products

ISDA Definitions Definitions Coverage Art. 1: General Definitions Art. 2: Parties Art. 3: Terms and Dates Art. 4: Payments Definitions Art. 5: Fixed Amounts Art. 6: Floating Amounts Art. 7: Calculations of Certain Floating Rate Options Art. 8: Rounding; Interpolation Discounting Art. 9: Payments Arts : Options: Definitions and Provisions; Exercise and Settlement of Swaptions Arts. 15 and 16: Optional and Mandatory Early Termination Art. 17: Cash Settlement

9 B A SWAP Fixed 6%, Q, A/360 Floating-Libor, Q, A/360 n/a: $ year Sample Interest Rate Swap

10 Documentation of Interest Rate Swap Pursuant to the 2000 ISDA Definitions

11 Documentation of Interest Rate Swap Pursuant to the 2000 ISDA Definitions (Cont’d)